Not Everything the California Legislature Enacts is Bad for All Employers All the Time

Posted in Contracts, Employment Agreement, Labor

The title should not be read to suggest some tectonic shift in the moods and values of the California Legislature or the Governor; far from it.  However, every once in a while something a bit useful does emerge. This time it is some certainty in executive level employment contracts. 

AB 1241 adds yet another section to the California Labor Code. New Section 925 provides that: 

An employer shall not require an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following: 

(1) Require the employee to adjudicate outside of California a claim arising in California.

(2) Deprive the employee of the substantive protection of California law with respect to a controversy arising in California.

Labor Code Section 925 goes on to provide that any contract violating these two requirements is voidable and any employee who pursues an action for violation of the new rule can obtain an injunction and his or her reasonable attorney’s fees. This all becomes effective Jan. 1, 2017. 

By now you may be feeling a bit misled by the title, but keep the faith a line or two longer. Tucked away in Labor Code Section 925(e) is the following provision: 

This section shall not apply to a contract with an employee who is in fact individually represented by legal counsel in negotiating the terms of an agreement to designate either the venue or forum in which a controversy arising from the employment contract may be adjudicated or the choice of law to be applied.

Not quite feeling better? Envision a sale or other merger and acquisitions event with an executive team that will be subject to employment agreements where everyone is represented by counsel. You might be able to have those agreements governed by Delaware law or the law of the parent company headquarters, provided it was negotiated with advice of counsel to the employee. Consider the need or desirability to transfer a key executive from out of state with a noncompete agreement into California. You may be able to hang on to that existing provision. Even if you could not come to terms, a fair amount of uncertainty can be eliminated and hence priced into the deal. 

Having built this up a bit, we close with a word of caution. Employers inclined to move forward with this opportunity should consider treading lightly and in a measured way. Section 925(e) has a number of disjunctive “or” provisions that creative counsel could use to address perceived over reach. It is possible a court or arbitrator may one day find that the contractual provision has limits imposed by California public policy. Thus, when drafting an executive agreement, an employer should consult with counsel in order to keep an eye on California law as it evolves.

Not-for-profit Hospitals and Health Care Providers Facing Retirement Plan Class Actions

Posted in ERISA, Retirement

There has been much media coverage of the recent class action lawsuits filed against some of the most prestigious universities in the United States by university employees. These class action lawsuits allege that the universities breached their fiduciary obligations in running their defined contribution 403(b) retirement plans by allowing the plans to pay excessive investment, record-keeping and administrative fees, thereby resulting in reduced retirement savings for their employees. The roster of current defendants includes Yale, MIT, Vanderbilt, Duke, Cornell, Johns Hopkins, and the University of Pennsylvania, among others, and more class actions of this type against other universities are expected.  These suits are similar to the fiduciary-duty breach hidden fee litigation that has bedeviled corporate 401(k) plan sponsors for years.  The suits also claim that some university retirement plans offer too many investment options (Duke University allegedly offered more than 400; John Hopkins, 440; and Vanderbilt, 340), have multiple recordkeepers (John Hopkins allegedly has five recordkeepers; Duke and Vanderbilt, four) and the universities failed to put record-keeping and other services for their retirement plans out for competitive bidding on a periodic basis.

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Ninth Circuit Court of Appeals Widens Circuit Split as to Class Action Waivers in Employee Arbitration Agreements

Posted in Arbitration, NLRB

In a decision likely to have significant ramifications for employers, a divided panel of the Ninth Circuit Court of Appeals ruled last week that employers cannot require employees to individually arbitrate their claims by way of “separate proceedings.” In Morris v. Ernst & Young, LLP, No. 13-16599, D.C. No. 5:12-cv-04964 (9th Cir. August 22, 2016), the Ninth Circuit joined the Seventh Circuit Court of Appeals and the National Labor Relations Board (NLRB or Board) in holding that requiring employees to sign an agreement precluding them from bringing concerted legal claims violates § 7 and § 8 of the National Labor Relations Act (NLRA).

The decision means that, at least for now, employers within the Ninth Circuit cannot prevent class and/or collective actions by mandating individual arbitration.

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Massachusetts Enacts Comprehensive Pay Equity Law

Posted in Compensation, Discrimination, Wage & Hour

On Aug. 1, 2016, Massachusetts Governor Baker signed into law the “Act to Establish Pay Equity.” The new law is intended to address the gender wage gap by strengthening the pay disparity prohibitions under existing law. The Pay Equity Act also provides employers the opportunity to assert an affirmative defense to wage claims based on the employer’s good faith self-evaluation of its pay practices. The new law does not go into effect until July 1, 2018, but particularly in light of the affirmative defense, employers should consider a self-evaluation study in advance of 2018.

Definition of Equal Pay for Comparable Work

The Pay Equity Act amends Massachusetts General Laws Chapter 149, Section 105A to provide a definition of “comparable work” as “work that is substantially similar in that it requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” The new law also specifies that “a job title or job description alone shall not determine comparability.”

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SEC Scrutinizes Severance Agreements for Compliance With Dodd-Frank

Posted in EEOC, Whistleblower

Recent SEC Fines

On Aug. 16, 2016, the U.S. Securities and Exchange Commission (SEC) announced that it had issued its second fine in as many weeks concerning a company’s use of severance agreements that contain confidentiality and/or covenant-not-to-sue or release provisions that allegedly violate SEC whistleblower Rules.

These recent SEC charges arise from SEC Rules, passed in August 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which enable whistleblowers to collect 10 percent to 30 percent of the total award when giving information that leads to an action recovering at least $1 million. Rule 21F-17 provides that “[n]o person may take any action to impede an individual from communicating directly with the [SEC] staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.”

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Split California Supreme Court Holds that without Express Agreement, Classwide Arbitrability is not a ‘Gateway Issue’ that must be Decided by the Court

Posted in Arbitration, Litigation

In a 4-3 decision, the California Supreme Court recently determined that the question of “who decides whether [an arbitration] agreement permits or prohibits classwide arbitration” is not subject to a “universal rule [that] allocates this decision in all cases to either arbitrators or the courts.” See Sandquist v. Lebo Automotive, Inc., Case No. S220812, 2016 WL 4045008 (Cal. July 28, 2016). Instead, the question depends on contract interpretation under California law, unless it conflicts with federal law. The arbitration agreement in Sandquist was silent concerning classwide arbitration, so the broad language confirming the parties’ agreement to have an arbitrator decide “any claim, dispute, or controversy” was sufficient to demonstrate that the parties expected the arbitrator to resolve the issue.

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National Labor Relations Board Extends Reach of Browning-Ferris Joint Employment

Posted in Labor, NLRB

On July 11, 2016, the National Labor Relations Board extended the reach of its ground-breaking 2015 Browning-Ferris decision, which announced an expansive view of “joint employment,” and ruled that “employer consent is not necessary” to require multiple employers to jointly bargain with “units that combine jointly employed and solely employed employees of a single user employer.”  Miller & Anderson, Inc.  (NLRB July 11, 2016).  In other words, if, for example, an employer has ten workers performing a similar job function, five of whom it employs directly and the other five of whom are provided through a “supplier” agency, the employer can be required to collectively bargain, together with the “supplier” employer, as to all ten employees.

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EEOC Publishes Revised Proposal to Collect Data on Employees’ Compensation and Hours Worked

Posted in EEOC

On July 14, 2016, the Equal Employment Opportunity Commission (EEOC) published a revised proposal to collect data on employees’ compensation and hours worked through the EEO-1 reports that larger employers are required to submit annually. Notwithstanding numerous public comments stressing the burdens that this reporting requirement would impose on employers and the limited statistical utility that the information may offer, the EEOC is pressing forward with only modest revisions to its original proposal.

The revised rule will apply to employers subject to Title VII of the Civil Rights Act with 100 or more employees.  The EEOC rejected comments urging a higher workforce threshold, stating, “exempting employers with fewer than 500 employees, or even fewer than 250…would result in losing data for a large number of employers who employ millions of workers, and thus would significantly reduce the utility of the pay data collection.”

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Nevada Gaming Regulators Begin Overseeing Las Vegas Nightclubs and Dayclubs

Posted in Club Venue Employee Regulations, Nevada

The nightclub and dayclub industry has become big business for casinos along the Las Vegas Strip. State gaming regulators are now requiring resort operators to take a more stringent approach in monitoring activity inside club venues. These new regulations came out of the 2015 Nevada Legislative session and were approved by the Nevada Gaming Commission.

Under the new regulations, casinos will designate an employee to oversee and monitor the clubs. That employee must be licensed under state gaming regulations as a key employee. Also, promoters and independent hosts for the clubs will have to file written agreements and register with the Nevada Gaming Control Board.

Clubs are a big draw for Las Vegas tourists, particularly the younger customer base that spends time on the Strip enjoying the many lucrative non-gaming entertainment attractions, rather than gambling. According to the Nevada Gaming Control Board, more than 60 percent of the total revenue generated by Las Vegas resorts last year came from non-gaming sources, such as hotel rooms, shopping venues, restaurants, entertainment attractions, and clubs.

Other U.S. jurisdictions and tribal gaming markets are beginning to mirror Las Vegas’s push to add non-gaming attractions. Other gaming regulatory bodies may elect to adopt club venue regulations like Nevada’s.

The club venue regulations identify certain acts as unsuitable methods of operation and expand the requirements for reporting criminal violations. The clubs are also required to file annual reports on their activities.

Additionally, the club venue regulations impose a new registration requirement upon all club venue supervisors, managers, security and surveillance personnel, servers, server assistants, bussers, restroom attendants, and anyone employed or contracted to offer hosting or VIP services.

Security and safety requirements are also included. Operators must assess their calendars on a regular basis to consider the impact on attendance and determine the appropriate number of security personnel needed for an event.

Clubs must also abide by certain requirements for emergency medical support depending on the anticipated size of their events.

Nevada Gaming Commission Chairman Tony Alamo Jr. said the clubs have been good for the gaming industry, providing an economic “shot in the arm.” However, he also said that the clubs need to be controlled and regulated. “I believe these regulation changes do what we set out to do,” Chairman Alamo said.


Fore more information on the regulation of casinos and nightclubs in Las Vegas, please subscribe to this blog or see our Gaming blog, “Covering the Spread.”

D.C. Lawmakers Join California and New York Raising the Minimum Wage to $15

Posted in Legislation, State Law, Wage & Hour

The District of Columbia Council recently passed a law to increase the minimum wage for employees to $15 by 2022. The District of Columbia joins other states in raising its minimum wage to rates higher than the current federal minimum wage of $7.25. The current minimum wage in the District ($10.50) is scheduled to rise in July to $11.50. Pursuant to the recently passed legislation, the minimum wage is set to increase yearly by $.70 until it reaches $15 in 2022. After that, the minimum wage will increase automatically in an amount that will be tied to inflation.

The legislation, which is expected to be signed by Mayor Muriel Bowser, does not provide for as drastic an increase for tipped workers.  The base pay for tipped workers increases from $2.77 per hour to $5 by 2022.  After that, further increases also will be tied to inflation.