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Issue 3 - 2014 Newsletter

In This Issue:

  •  Court Determines that Mandatory Usage of a Personal Cell Phone Is Reimbursable 
  • Healthy Families, Healthy Workplaces Act of 2014 

Court Determines that Mandatory Usage of a Personal Cell Phone Is Reimbursable Under Labor Code Section 2802

On August 12, 2014, the Court of Appeals in the case of Cochran v Schwan’s Home Service, Inc., concluded that an employer is required under Labor Code Section 2802 to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone for business-related purposes.  Absent such reimbursement, the court held that “the employer would be passing on its operating expenses to its employees. “

The facts of the case are relatively straightforward, even if the result is somewhat troubling.  Mr. Cochran worked as a customer service manager for Schwan’s Home Service, Inc. and sued his employer to recover expenses for business related use of his personal cell phone.  He asked the court to certify this case as a class action.

The trial judge denied class certification.  The judge determined that if the employee did not pay anything out of pocket, above and beyond the expense of maintaining the personal cell phone, there was no “expense incurred” and no reimbursement was due.

The Court of Appeal reversed, deciding that under Labor Code Section 2802, an employer must always reimburse an employee for the expense of the mandatory use of his or her personal cell phone.  It is irrelevant that the employee incurred no additional expense due to the mandatory use of the personal cell phone for business reasons.

Under this appellate court decision, to be in compliance with Labor Code Section 2802, an employer should pay at least a portion of the employee’s personal cell phone bill (regardless of whether the mandatory business usage resulted in additional charges to the employee), provide the employee with a separate device or make it very clear to the employees that using a personal cell phone is voluntary (and not required or encouraged). 

 Although the court acknowledged that calculating damages could be problematic, this does not get a non-compliant employer off the hook.  Attorneys’ fees can be awarded to a prevailing employee under Labor Code Section 2802, regardless of the actual amount of damages.  This fact alone could make any class or representative action litigation very costly, even with a relatively small amount of monetary damages.

What should employers do?

In light of this decision, companies will want to review their expense reimbursement policies and practices when cell phone usage is required as well as their other expense reimbursement policies when employees are required to use personal property to accomplish work duties. Past application of expense reimbursement policies also should be addressed with an eye towards avoiding liability from potential litigation.

The principles set forth by the court are probably not limited to just personal cell phones.  The same principles could be applied to personal laptops, “tablets”, land lines, and the internet connection used for all electronic devices.  Also at issue is whether any tools used for work from home (telecommuting) could be subject to Labor Code Section 2802 reimbursement claims.  Time will only tell the full ranges of the impact of this decision.


Healthy Families, Healthy Workplaces Act of 2014 (A.B. 1522) 

On September 10, 2014, Gov. Jerry Brown signed A.B. 1522 into law.  Starting July 1, 2015,  employees working in California for thirty (30) or more days within a year of being hired are entitled to paid sick days – accrued at a rate of at least one hour for every thirty (30) hours worked – which the employee may use for personal illness/preventive care, to care for a sick family member, or to recover from domestic violence or assault, as specified.

The bill broadly defines the term “employer” to include all employers regardless of size. The definition of “employee,” however, exempts all employees covered by collective bargaining agreements which provide paid sick leave among other things, and certain construction industry employees covered by collective bargaining agreements that either expressly waive the requirements of A.B. 1522, or are entered into before January 1, 2015.

Prior to this, California law did not require businesses to provide employees with paid sick leave. Thus, the bill is a sweeping change to sick leave rules for California employers. It necessitates businesses to evaluate their current policies for compliance and to make necessary changes by July 1, 2015.

Summary of A.B. 1522:

Effective date: Employers must permit employees to begin to accrue paid sick leave starting July 1, 2015.

Covered employers: A.B. 1522 applies to all employers, including government entities.

Covered employees: Employees eligible for paid sick leave include all employees (exempt and non-exempt) who work 30 or more days in California within a year of the commencement of their employment, except (a) those covered by collective bargaining agreements which provide paid sick leave and other specified terms, and construction industry employees covered by collective bargaining agreements that either waive the requirements of A.B. 1522, or are entered into before January 1, 2015; (b) providers of home health care services; and (c) individuals employed by an air carrier as a flight deck or cabin crew member and subject to Title II of the federal Railway Labor Act. 

Notably, the construction industry exemption is narrow. It applies only to onsite employees performing specific categories of work. Moreover, for collective bargaining agreements which are entered into after January 1, 2015, the agreement must expressly waive the requirements of the paid sick leave law in clear and unambiguous terms.

Accrual of paid sick leave: Eligible employees will accrue sick leave at a rate of one hour for every 30 hours worked, to a maximum of six days or 48 hours per year.

Payment: Employers must compensate paid sick days at the same wage as the employee normally earns during regular work hours.

Use of paid sick leave: Employees may use accrued sick leave beginning on their 90th day of employment. Employers may limit the length of an employee’s leave to a minimum increment of two hours. Employers may not require an employee to find a replacement worker to cover the absence due to use of paid sick leave.

The leave may be used for the diagnosis, care or treatment of an existing health condition of, or preventative care for, the employee or a family member. The law defines “family members” as including children (biological, adopted or foster), stepchildren, wards, parents (biological, adoptive or foster), step-parents, legal guardians, spouses, registered domestic partners, grandparents, grandchildren and siblings. Also, sick leave may be used by employees who are victims of domestic violence, sexual assault, or stalking for purposes identified in Labor Code Section 230(c) and 230.1(a).

Carryover: Accrued paid sick days carry over to the following year. However, employers may limit employees’ use of paid sick days to 24 hours or 3 days in each year of employment. No carryover is required if an employee receives full leave at the beginning of each year through a company paid leave policy (e.g., paid sick days or paid time off) which may be used under same conditions as paid sick leave under A.B. 1522, and the policy does either of the following:  (1) satisfies the accrual, carry over, and use requirements of this section; or (2) provides no less than 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for employee use for each year of employment or calendar year or 12-month basis.

Not payable at termination: Employers are not required to pay employees for accrued but unused paid sick leave at the termination of employment.

Unused sick leave reinstatement: If an employee separates from an employer and is rehired within one year from date of separation, the previously accrued and unused paid sick leave is reinstated. Further, accrual and ability to use paid sick days is effective upon rehiring.

Paid sick day advances permitted: Employers may advance paid sick days to employees in advance of accrual, at the employer’s discretion, and with proper documentation.

Timing of payment: Employers must pay for the sick day  no later than the payday for the next regular payroll period after the leave was taken.

Employer notice required: Employers must notify employees in writing (through pay stubs or on designated pay days) of the amount of sick leave available to them.

Employee notice required: Employees must provide their employer with reasonable advance notice of their need for sick leave when the need is foreseeable, and must provide notice as soon as practicable when the need for leave is unforeseeable. 

Posting required: Employers must display a poster reflecting information regarding paid sick leave. The Labor Commissioner will create a poster containing this information to make available to employers.

Recordkeeping required: For at least three years, employers must maintain records documenting the hours worked and paid sick leave accrued and taken by employees. If the employer does not maintain adequate records, the law creates a presumption that employees are entitled to the maximum number of hours accruable under the law (48 hours).

Penalties for violation: If employers withhold paid sick leave from employees unlawfully, the Labor Commissioner may impose penalties of $250 or three times the value of the paid sick leave days withheld, whichever is greater (not to exceed $4,000). Additional penalties are also possible depending on nature of violation.

Presumption of retaliation: Significantly, the law creates a rebuttable presumption of retaliation if an employer takes adverse employment action against an employee within 30 days of the employee’s: (A) filing of a complaint by the employee with the Labor Commissioner or alleging a violation of this article; (B) cooperation with an investigation or prosecution of an alleged violation of this article; or (C) opposition to a policy, practice, or act that is prohibited by the new law.

2810.5 Written Notice: In addition to the notice required by Labor Code 2810.5, employers will be required to provide new hires with the following information: the employee may accrue and use sick leave; has a right to request and use accrued paid sick leave; may not be terminated or retaliated against for using or requesting the use of accrued paid sick leave; and has the right to file a complaint against an employer who retaliates. The Labor Commissioner will prepare a template that complies with these requirements to make available to employers.

Private cause of action: The law permits a private right to bring a civil lawsuit, and provides a prevailing employee with a right to recover equitable, injunctive or restitutionary relief, and attorney’s fees and costs.

What Should Employers Do?

Employers who have a policy regarding sick leave: Employers that have adopted policies regarding sick leave (or paid time off that can be used for the same purposes as leave pursuant to A.B. 1522) should review their policies to ensure that, as of July 1, 2015, their policies meet all the new requirements..

Employers who don’t have a policy regarding sick leave: Employers that have not adopted policies regarding sick leave (or paid time off that can be used for the same purposes as leave pursuant to A.B. 1522) should create and implement policies that comply with the requirements of the law by July 1, 2015. 

Be alert to the risk of retaliation claims: A.B. 1522’s presumption of retaliation creates a substantial risk of liability for employers who take adverse action against an employee within 30 days of the employee’s opposition to any acts in violation of the law. Employers should confer with counsel before discharging any employee who has recently taken or requested paid sick leave pursuant to A.B. 1522.


Issue 1 - 2015 Newsletter
Issue 2 - 2014 Newsletter

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