November 2019 Update
Case Law and Statutory Developments
Effective January 1, 2020, the Fair Employment and Housing Act (FEHA) (Govt C §§12900–12996) specifies that “race” is inclusive of traits historically associated with race, including hair texture and protective hairstyles. “Protective hairstyles” for these purposes includes, but is not limited to, such hairstyles as braids, locks, and twists. Govt C §12926(w), (x). See §1.4.
In Ramos v Superior Court (2018) 28 CA5th 1042, a law firm’s partnership agreement was found to be unconscionable and void as a matter of law. The plaintiff’s ability to pursue unwaivable FEHA and related wrongful termination claims was inhibited by unconscionable terms requiring her to pay half the costs of arbitration, pay her attorney fees, and maintain confidentiality to the extent that it would affect her ability to undertake discovery. See §1.17.
In Epic Systems v Lewis (2018) 584 US __, 138 S Ct 1612, the United States Supreme Court confirmed that class action waivers are permissible under the Federal Arbitration Act (FAA) (9 USC §§1–16) in the context of a challenge under the National Labor Relations Act (NLRA) (29 USC §§151–169). See §1.17.
Continuing its trend of pro-arbitration opinions, the United States Supreme Court determined in Lamps Plus, Inc. v Varela (2019) US, 139 S Ct 1407 that if an arbitration agreement is ambiguous as to whether class arbitration is permitted, that is insufficient to find that the parties consented to it. Put differently, class arbitration may not proceed unless it is expressly permitted by the arbitration agreement. See §1.17.
In 2018, the California Legislature enacted AB 3247, codified at CCP §1281.2, which compels a court to order arbitration unless: (1) the right to compel arbitration has been waived by the petitioner; (2) grounds exist for the revocation of the agreement; or (3) a party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact. See §1.17.
The Department of Labor has issued a new guidance for mandatory posting requirements relating to an employer’s intention to hire workers under the H-1B visa program. See DOL Field Assistance Bulletin No. 2019–3 (Mar. 15, 2019), available at https://www.dol.gov/whd/FieldBulletins/fab2019_3.pdf. See §2.19.
In Correia v NB Baker Elec., Inc. (2019) 32 CA5th 602, 608, the court affirmed the trial court’s refusal to order plaintiffs’ claim under the Private Attorneys General Act of 2004 (PAGA) (Lab C §§2698–2699.65) to arbitration, based in part on the California Supreme Court’s reasoning in Iskanian v CLS Transp. Los Angeles, LLC (2014) 59 C4th 348, notwithstanding the U.S. Supreme Court’s ruling in Epic Sys. Corp. v Lewis (2018) 584 US ___, 138 S Ct 1612, that class action waivers in arbitration agreements are enforceable despite National Labor Relations Board’s position that such agreements violate the National Labor Relations Act. See §§3.7B, 3.62.
In Maplebear, Inc. v Busick (2018) 26 CA5th 394, 397, the court affirmed the trial court’s conclusion that it lacked jurisdiction to consider a petition to vacate a “partial final award” in which the arbitrator determined only that the parties’ arbitration agreement permitted the claimant to move for class certification. See §3.7C.
In Ramos v Superior Court (2018) 28 CA5th 1042, 1055, the court concluded that the Supreme Court “explicitly reaffirmed” in Epic Sys. Corp. v Lewis (2018) 584 US ___, 138 S Ct 1612 that, “like Concepcion before it, [ ] the FAA does not preempt the invalidation of arbitration agreements by ‘generally applicable contract defenses, such as fraud, duress, or unconscionability.’” See §3.7C.
In Mora v Webcor Constr., L.P. (2018) 20 CA5th 211, the court held that payments to a union vacation trust fund were not “vacation pay” within the meaning of Suastez v Plastic Dress-Up Co. (1982) 31 C3d 774 because Lab C §226(a) does not cover payments to a union trust fund. See §§3.29, 9.13.
In AMN Healthcare, Inc. v Aya Healthcare Servs., Inc. (2018) 28 CA5th 923, the court expressed doubt about the viability of Loral Corp. v Moyes (1985) 174 CA3d 268 after Edwards v Arthur Anderson LLP (2008) 44 C4th 937, because “Moyes’s use of a reasonableness standard in analyzing the nonsolication clause there at issue [ ] appears to conflict with Edwards’s interpretation of [Bus & P C §16600], which, under the plain language of the statute, prevents a former employer from restraining a former employee from engaging in his or her ‘lawful profession, trade, or business of any kind,’ absent statutory exceptions not applicable here.” See §§3.45C, 7.18.
Effective January 1, 2019, the Ralph Civil Rights Act (CC §51.7) shall be cited as the Ralph Civil Rights Act of 1976. The Bane Act (CC §52.1) shall be known as the Tom Bane Civil Rights Act. See §3.62.
In Saheli v White Mem. Med. Ctr. (2018) 21 CA5th 308, 332, the court concluded that reasoning from Iskanian v CLS Transp. Los Angeles, LLC (2014) 59 C4th 348 and Tanguilig v Bloomingdale’s, Inc. (2016) 5 CA5th 665 about the waivability of claims under PAGA does not apply to claims under the Ralph Civil Rights Act of 1976 and Tom Bane Civil Rights Act, because PAGA claims and claims under those acts are “fundamentally different.” See §3.62.
The California Legislature recently amended PAGA by adding Lab C §2699.6, which provides that, effective January 1, 2019, PAGA does not apply to employees in the construction industry who are under a collective bargaining agreement in effect before January 1, 2025, that includes a grievance and binding arbitration procedure to redress violations. See §3.62.
Under Dynamex Operations W. v Superior Court (2018) 4 C5th 903, 916, a worker is considered an independent contractor only if the hiring entity shows that (A) the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact; (B) the worker performs work that is outside the usual course of the hiring entity’s business; and (C) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity. See the recent case of Garcia v Border Transp. Group, LLC (2018) 28 CA5th 558 (for purposes of wage and hour claims, summary judgment evidence did not establish, under ABC test, that taxi driver was independent contractor rather than covered employee, because evidence did not show that he actually had independent business, occupation, or profession). See §4.3A.
In Barker v Insight Global, LLC (ND Cal Jan. 11, 2019, No. 16-cv-07186-BLF) 2019 US Dist Lexis 6523, a federal court in the Northern District of California, relying on the reasoning in AMN Healthcare, Inc. v Aya Healthcare Servs., Inc. (2018) 28 CA5th 923, determined that intruding provisions in general are invalid and unenforceable in California. See §7.18.
Government Code §12950.1 was amended in 2018 by SB 1343 to broaden required sexual harassment prevention training. As amended, the statute requires that by January 1, 2020, employers with five or more employees (including temporary and seasonal employees) provide training to all employees, not just supervisory employees, within 6 months of their hire. However, the mandatory harassment training required for nonsupervisory employees is for 1 hour, rather than the 2 hours for supervisory employees. At the same time, SB 1300 expanded the potential content of harassment training by adding new Govt C §12950.2, to allow the training to include “bystander intervention training.” Note that Senate Bill 778, effective August 30, 2019, extends the deadline for compliance to January 1, 2021. The bill requires new nonsupervisory employees to be provided the training within 6 months of hire and new supervisory employees to be provided the training within 6 months of the assumption of a supervisory position. The bill also specifies that an employer who has provided this training and education in 2019 is not required to provide it again until 2 years thereafter. See §9.60.
California’s “Paid Family Leave” program does not affect protected leaves of absence; it provides wage replacement benefits for otherwise unpaid leave. Un Ins C §§3300–3306 (which will remain in effect until January 1, 2021, on which date Un Ins C §§3301, 3302.1, 3303 and 3303.1 will be repealed and replaced with new Un Ins C §§3301, 3302.1, 3302.2, 3303, 3303.1 and 3307, to expand the scope of the program to include time off to participate in a qualifying exigency related to the covered active duty or call to covered active duty of the individual’s spouse, domestic partner, child, or parent in the Armed Forces of the United States.) See §11.2.
On May 10, 2018, the California Supreme Court issued an order approving new Rules of Professional Conduct for attorneys, which went into effect November 1, 2018. All references to the former Rules in the text have been updated.
New Book Sections
A new section has been added discussing IRC §83(i) stock options and restrictive stock units. See §8.10A.
Changes in Forms
The form “Sample Employment Application with Applicant’s Statement” has been updated to include a more complete listing of protected categories under FEHA. See §1.3.
The form “Interview Guide” has been updated with information about criminal background checks and salary history inquiries. See §1.5.
The form “Hiring Document Guide” has been updated in several places. See §1.6.
The form “Sample Authorization to Obtain Job-Related Medical Information and Drug Testing” has been modified with additional language. See §1.7.
The form “Notice of Intent to Procure Consumer Report, Consumer Credit Report, Investigative Consumer Report, and Authorization” has been substantially modified. See §1.8.
The form “Company’s Certification to Credit Reporting Agency” has been substantially modified. See §1.10.
The form “Stand-Alone At-Will Agreement” has been modified with additional language in the fourth paragraph. See §1.13.
The form “Sample Arbitration Agreement” has been slightly modified in the “PAGA Claims” provision. See §1.17.
The “Checklist for Stock Option Exercise” has been updated to include reference to the escrow arrangement required under Notice 2018–97, 2018–52 Int Rev Bull 1. See §8.26.
The form “Consideration and Taxes” has been modified to include an optional provision about elections under IRC §83(i). See §8.36.
The form “Adjustments on Changes in Capitalization or Corporate Transaction” has been modified. See §8.40.
The form “Interpretation of Plan” has been modified in the subsection relating to choice of law. See §8.49A.
The form “Exercise of Option” has been modified in the subsection relating to taxes. See §8.57.
The form “Grantee’s Representations” has been renamed “Grantee’s Acknowledgments and Representations,” and additional provisions have been added to the form. See §8.58.
The form “Restrictions on Transfer; Stop-Transfer Notices; Refusal to Transfer; Clawbacks” has been modified to change a cross-reference. See §8.65.
The form “Tax Consequences” has been modified by the addition of a new alternative provision and other changes to its language. See §8.66.
The form “Notices” has been modified by the addition of a cross-reference. See §8.69.
The form “Interpretation, Modification, and Enforcement of Option Agreement” has been modified. See §8.70.
The form “Exhibit A: Terms of Exercise; Taxes” has been modified. See §8.77.
The form “Grantee’s Representations” has been renamed “Grantee’s Acknowledgments and Representations,” and additional provisions have been added to the form. See §8.88.
The form “Restrictions on Transfer of Shares” has been modified to correct a cross-reference. See §8.96.
The form “Notices” has been modified. See §8.102.
The form “Interpretation, Termination, Modification, and Enforcement of Agreement” has been modified with regard to choice of law. See §8.103.
The form “Leave of Absence Designation—Master” has been updated with further information about military-related leave. See §11.3; see also §§11.4–11.8.