I.
LEGISLATIVE UPDATE

As a recap, the following employment-related legislation was passed this year.

NATIONAL

H.R. 4 : On August 17, 2006, President George W. Bush signed The Pension Protection Act of 2006, a new law intended to reform the outdated pension laws, provide more information and control to employees, and impose safeguards and contribution requirements for employee retirement plans to ensure sufficient funding.

STATE

AB 1835/SB 1162 : This new law provides for an increase in the minimum wage to $7.50 on January 1, 2007, and to $8.00 on January 1, 2008. The revised amended bill does not include the controversial automatic future adjustments based on the rate of inflation.

AB 2095 : This new law limits the application of the Fair Employment and Housing Act's (“FEHA”) sexual harassment training requirement so as to apply only to supervisory employees who are located within California . This new law also provides that an employer is considered to have complied with the itemized wage statements requirement if overtime hours worked in the current pay period are itemized as corrections on the paystub for the next regular pay period. Corrections included in a subsequently issued paystub must identify the dates of the pay period to which they refer.

II.
AGENCY UPDATE

The Department of Labor Wage and Hour Division (“WHD”) has issued new Opinion Letters responding to the following questions under the federal Fair Labor Standards Act (“FLSA”):

• Are civilian public safety dispatchers entitled to overtime after working 40 hours per week when their collective bargaining agreement with the city/employer provides for payment of overtime after working 48 hours per week? Yes. Based on the clear language of the FLSA, the WHD concluded that the city would violate the FLSA requirement to pay overtime for employees who work more than 40 hours per week, if it followed the agreement provision and only paid overtime when the dispatchers worked in excess of 48 hours in a workweek. Wage and Hour Division Opinion Letter , FLSA2006-36.



• Must a store manager provide physical or in person supervision of employees in order to fall under the executive exemption requirement of the FLSA? No. The WHD restated its longstanding position that a store manager does not have to work at the same time or within the same establishment as his or her subordinate employees to fall under the executive exemption so long as the manager does in fact “customarily and regularly direct the work of two or more other employees.” Wage and Hour Division Opinion Letter , FLSA2006-35.



• Do city Community Events Supervisors qualify for the administrative exemption under the FLSA? Yes. The WHD found that a Community Events Supervisor (“CES”) who is responsible for planning, coordinating, and staging six major events, negotiating contracts, hiring and firing employees, as well as designing programs and marketing for each event, which success depends on the work of this CES, falls under the administrative exemption. Another CES who organizes and coordinates the city's summer day camps, and assigned similar responsibilities, likewise falls under the administrative exemption. The WHD reasoned that the described CES duties are “directly related to management or general business operations” and involve the exercise of discretion and independent judgment with respect to matters of significance. Wage and Hour Division Opinion Letter , FLSA2006-34.



• Are propane gas delivery employees overtime exempt? In this case, yes. Section 7(i) of the FLSA provides that employees can be overtime exempt if:

  - The employee is employed by a retail or service establishment;
  - The employee's regular rate of pay must exceed one and one half times the applicable minimum wage; and
  - More than half of the employee's total earnings in a representative period (not less than one month) must consist of commissions on goods or services.

  Here, the WHD found that the gas delivery employees met all of these elements and thus are properly classified as overtime exempt. Wage and Hour Division Opinion Letter , FLSA2006-33.



• Are wilderness expedition course instructors and other employees of a non-profit educational organization overtime exempt? Yes. The WHD found that the described base camps all met the definition of “amusement or recreational” facility, which facilities are expressly exempt from overtime requirements under the FLSA. Wage and Hour Division Opinion Letter , FLSA2006-37.

III.
JUDICIAL UPDATE

Ninth Circuit Finds Equal Pay Act Claim Not Time Barred

The federal Ninth Circuit Court of Appeal addressed a case in which an employee had filed Title VII and federal statutory age discrimination claims that were stayed and then dismissed while the employer/defendant was in bankruptcy. After the bankruptcy stay was lifted, the employee filed a second complaint which she later amended to include a claim under the Equal Pay Act. The court held that the Title VII and age claims were time-barred because they were re-filed after the deadline had expired and there was no viable reason for suspending the filing deadline. The court, however, found that the Equal Pay Act claim, which had a longer statute of limitations that was suspended during the bankruptcy filing, related back to the original allegations in the second complaint and was therefore not time barred. O'Donnell v. Vencor Inc. , 9 th Cir. Case No. 0515687 (October 10, 2006, amended October 31, 2006).

Ninth Circuit Finds Claims Adjusters Fall Under FLSA Administrative Exemption

The Ninth Circuit addressed a class action case brought by claims adjusters who handle claims for automobile damage, other property damage, and personal injuries. The suit alleged that the adjusters were misclassified as exempt and are owed unpaid overtime. This case was brought prior to the implementation of the federal regulation declaring that most insurance claims adjusters fall under the administrative exemption. However, the court held that, since this regulation was consistent with the existing law, the adjusters were properly classified as exempt under federal law. The court emphasized that the adjusters' duties include using their discretion in determining coverage for a loss, setting reserves, determining liability, and negotiating with the insured or a lawyer. (Note that other cases have found certain claims adjusters as nonexempt.) Miller v. Farmers Insurance Exchange, 9 th Cir. Case Nos. 05-35080, 05-35145.

State Court Precludes Class Action When Class Certification Denied In Prior Case

The California Court of Appeal held that an employee claiming to represent a class of sales managers seeking unpaid overtime could not pursue a class action because a court in a prior lawsuit had held that a different employee could not prove the requisite elements of a proper class. The court reasoned that the doctrine of collateral estoppel applies in this context and prevented class certification. Collateral estoppel is a legal doctrine which prevents the re-litigation of issues that were resolved in a prior proceeding between the same parties or parties in privity to each other. Alvarez v. May Department Stores Company , Cal.App.Ct. (2d Dist.) Case No. B184504 (October 11, 2006).

Workplace Violence Safety Act Petition Cannot Provide Basis for Malicious Prosecution Claim

The California Court of Appeal held that an employer who unsuccessfully pursues a petition for an injunction (restraining order) under the California Workplace Violence Safety Act cannot be subject to a claim for malicious prosecution, and such a claim can be properly stricken from the complaint. Robinzine v. Vicory , Cal.App.Ct. (1 st Dist.) Case No. A108176 (October 17, 2006).

Court Clarifies Deadline for Wage and Hour Claims

In a legal malpractice case, the California Court of Appeal made clarifications to the statutory deadlines for filing certain wage and hour claims as follows:

• Business expense reimbursement : A claim to recover business expenses must be brought within three years from the date the employee incurs the expense.



• Unpaid wages : A claim for unpaid wages must be brought within two years from the date the wages are required to be paid.



• Vested vacation : The time for filing a claim for vested vacation starts to run from the date of termination or resignation and includes any accrued and unused vacation pay. This is a departure from prior opinions of the Division of Labor Standards Enforcement and at least one court, which have found that a claim for vested vacation runs from termination but the employee can only recover vacation earned in the prior two years (when there is an oral contract) or four years (when there is a written contract). The court did not decide the time period for filing such a claim. Church v. Jamison , Cal.App.Ct. (5 th Dist.) Case No. F048224 (October 23, 2006).

Court Clarified Penalties Allowed in Physical Access Cases

The California Court of Appeal held that a plaintiff alleging disability discrimination in physical access to public facilities may choose between pursuing higher penalties of the California Unruh Act which requires proof of intentional discrimination or lower penalties under the California Disabled Persons Act for unintentional violations, but cannot recover under both. In this case, the court threw out the plaintiff's case since he sought the higher penalties but could not prove intentional conduct. Gunther v. Lin , Cal.App.Ct. (4 th Dist.) Case No. G036042 (October 27, 2006).