Job Posting Wage Disclosure, Annual Reporting Added to Equal Pay Act

As noted last year in a prior post, California law requires employers to pay the same wage to employees performing substantially similar work whenever they possess relevant EEO distinctions such as sex, gender, and race. Employers should expect the law to cause a new wave of employment litigation over the coming years, requiring careful justification of differences with legitimate factors, such as tenure.

A recent SuperLawyers.com article (quoting firm attorney, Richard Rybicki) highlights this emerging trend and the state's new requirements that (1) employers with 15 or more employees disclose pay scale information on all job postings, and (2) employers with 100 or more employees report race, ethnicity, and gender information along with mean and medium pay rates in ten different job categories. Pay data reporting procedure can be reviewed on the California Civil Rights Department website.

The wage posting requirement, part of California's Equal Pay Act, will apply to many more small and medium-sized employers. And unlike large-employer annual reporting, posting requirements are enforced by the ever-aggressive California Division of Labor Standards Enforcement ("Labor Commissioner"). Guidance on posting requirements and other important parts of the law can be viewed on the Labor Commissioner's website.

Employers should continue to monitor wage differences between employees performing substantially similar work, both at hire and as part of regular compliance audits. This is yet another area where an ounce of prevention is worth many pounds of cure!

Court Says Employers Must Reimburse Costs of Working from Home During the Pandemic

In an opinion with vast implications for employers whose employees worked from home during the pandemic, a California court has held that - despite government orders requiring business to operate remotely (and to "exclude" many employees during the pandemic) - employers are liable for virtually all incidental expenses associated with working at home.

In the case, a worker operated remotely during the COVID-19 pandemic due to California Governor Gavin Newsom's executive order requiring residents to stay at home except as needed to maintain critical industry sectors. The worker remained working at home due to the order, later suing for penalties under California’s Private Attorneys General Act ("PAGA") for violation of Labor Code section 2802(a), requiring reimbursement of "all necessary expenditures" that were "incurred by the employee in direct consequence of the discharge of his or her duties.” These included expenses such as internet access, telephone service, a telephone headset, and a computer and accessories.

The employer argued that it was not responsible for (or the "proximate" legal cause of) such expenses as they were caused by the state government's stay-at-home order. The court rejected this argument, holding: "the obligation does not turn on whether the employer’s order was the proximate cause of the expenses; it turns on whether the expenses were actually due to performance of the employee’s duties."

This case will have two immediate consequences. First, it certainly will lead to myriad new PAGA claims based not only on home-based work during the pandemic but also on all hybrid and telecommute employment. Second, it will open the door into a broader question as to which expenses must be reimbursed (internet, heat, desk space, electricity, insurance, etc.) and what proportion of such expenses must be paid. Plaintiff attorneys are likely to rely on prior state caselaw regarding mobile phone expenses, requiring reimbursement even where phone use created no additional cost for an employee (e.g., when employees have an "unlimited" mobile plan or their phone costs are paid by a family member).

Employers should keep an eye on developments following this case and consider whether certain work-at-home costs ought to be reimbursed retroactively. This may require approaching employees and asking them to estimate the costs associated with working at home. There is no good guidance on this issue yet.

The case, Thai v. International Business Machines Corp., can be viewed here.

Revise Arbitration Agreements to Cover PAGA Claims (or Suffer the Consequences)!

It has been clear for nearly a year that employers should adopt employment arbitration agreements covering claims under the California Labor Code Private Attorneys General Act (“PAGA”). While state courts long held PAGA to be exempt from arbitration, the United States Supreme Court disagreed in its 2022 Viking River Cruises, Inc. v. Moriana decision (available here).

Viking River Cruises, Inc. ended a dilemma faced by employers drafting effective arbitration agreements. While it was possible to include PAGA or use vague language referring to “representative” or “mass” claims, the strategy risked state-court refusal to enforce the rest of the agreement in non-PAGA cases. This made it almost impossible to craft language that did not either (1) "carve out" PAGA completely, or (2) include PAGA claims - risking the agreement’s enforceability.

Employment arbitration agreements should now be revised immediately, despite the effort needed to replace current language, to ensure PAGA coverage if necessary.

One recent California case highlights the urgency of this issue. In Duran v. EmployBridge Holding Co., an employer had excluded PAGA claims but argued that – under the rest of the agreement’s language – it ought to apply to an employee’s PAGA suit following the United States Supreme Court’s Viking River Cruises, Inc. decision.

The arbitration agreement did cover most non-individual claims, stating that neither the employee nor the employer would bring any “class action, collective action, or representative action claims against each other in arbitration, in any court, or otherwise.” This certainly would prevent against class-action claims by the employee given United States Supreme Court authority holding that – unless an employer expressly agrees – class claims cannot be made by employees covered by arbitration agreements.

The problem with the arbitration language was that it expressly excluded PAGA claims. Its only reference to PAGA stated:

“Claims for unemployment compensation, claims under the National Labor Relations Act, claims under PAGA and any claim that is non-arbitrable under applicable state or federal law arbitrable under this Agreement.”

Using this language was a reasonable decision before the Viking River Cruises decision. But relying on the agreement's express language, the court found that it had not changed and the PAGA exclusion still applied. As a result, the employee’s PAGA claim survived and was sent down for trial in civil court.

Duran v. EmployBridge Holding Co. highlights the urgent need for employers to revise their arbitration agreements now to clarify two issues.

First: the agreement expressly covers PAGA claims.

Second: the agreement allows an employee to bring only her own individual PAGA claim, excluding arbitration of all claims based on Labor Code violations allegedly suffered by other employees. This ensures that PAGA claims will remain a single-employee matter in employment arbitrations (though the California Supreme Court will soon consider the fate of PAGA claims based on employees other than the individual’s arbitration agreement in another case).

The case can be viewed here.