UPDATES FOR CALIFORNIA EMPLOYERS – DECEMBER 2015

Continuing Violation Doctrine

In Jumaane v. City of Los Angeles, plaintiff sued the City of Los Angeles for alleged disparate impact and disparate treatment discrimination, harassment, and retaliation based on his race.  Plaintiff alleged that adverse employment actions were taken against him in June 1999 and April 2011 when he was suspended from work.  Plaintiff filed a complaint with the Department of Fair Employment and Housing on April 16, 2002, and subsequently filed a civil action.  After losing at trial, the City of Los Angeles appealed, and the Court of Appeal reversed, holding that plaintiff could not recover for acts occurring more than one year before he filed his DFEH complaint. For the continuing violation doctrine to apply, plaintiff was required to prove that conduct occurring outside the limitations period was (1) similar or related to the conduct that occurred earlier; (2) the conduct was reasonably frequent; and (3) the conduct had not yet become permanent. While substantial evidence supported a finding as to the first two elements, plaintiff failed to show that the conduct taking place in the 1990s had not become permanent by the time of his June 1999 suspension.  Further the Court of Appeal found that substantial evidence did not support a finding of disparate impact and disparate treatment discrimination, harassment, and retaliation based on plaintiff’s race.

Waiting Time Penalties NOT Wages

According to a recently issued Chief Counsel Advice Memorandum from the Internal Revenue Service, waiting time penalties under Section 203 of the California Labor Code are not “wages” for purposes of federal income or employment taxes.  The Chief Counsel concluded that waiting time penalties are not wages under the Internal Revenue Code because they are not remuneration for an employee’s services.  In reaching this conclusion, the Chief Counsel relied, in part, on the California Supreme Court’s decision in Pineda v. Bank of America, in which the California Supreme Court ruled that an employee could not recover waiting time penalties as restitution because, unlike wages, the employee had no vested interest in those funds.  Because the obligation to pay waiting time penalties arises from the employer’s action or inaction, rather than an employee’s labor, waiting time penalties are more akin to liquidated damages and should not be considered wages subject to withholding and employment taxes.

Equal Pay for Equal “Similar” Work

California’s new Fair Pay Act (“Act”) was signed into law by Governor Jerry Brown on October 6, 2015.  The Act becomes effective January 1, 2016.  Prior to Act, California Labor Code section 1197.5 prohibited discrimination in pay based on gender.  The old law required equal pay for “equal work,” except under four situations: a seniority system; a merit system; a system measuring earnings by quantity or quality of production; or a “bona fide” factor other than gender.  Under the Act, instead of showing “equal work,” employees need only show “substantially similar work when viewed as a composite of skill, effort and responsibility.”  Employees can compare their wages to similar work, even if the job title is different.  Employees are also no longer limited to the “same establishment,” but may instead compare pay practices at any of the employer’s locations.  Also under the Act, the employer, not the employee, carries the burden of showing whether a wage differential falls within one of the four exceptions.  If there is any difference in pay at all, the employer bears the burden to show that the entire difference in pay falls into one of the four exceptions.  Employees can also nullify the “bona fide factor” defense by showing an alternate business practice that would serve the same purpose without a difference in wages.  The Act is considered one of the most stringent equal pay laws in the country.