Labor & Employment Noteworthy News: California Edition

California Court of Appeal Permits Employer to Deduct from Exempt Employees’ Accrued Vacation Leave for Partial-Day Absences
On July 21, 2005, the California Court of Appeal ruled for the first time that California employers are permitted to require exempt employees to use accrued vacation time for partial-day absences due to personal (non-medical) reasons.  The Court acknowledged in its opinion that the decision contradicts the letter opinions previously issued by California’s Labor Commissioner, the state agency which regulates the enforcement of wage and hour issues in the state.  Conley v. Pacific Gas and Electric Company, Case No. A105832.  Following the decision in Conley, the Labor Commissioner withdrew its conflicting letter opinions.

It is yet to be seen if California Supreme Court will review the decision.  Nonetheless, as long as Conley remains good law, California employers are permitted to deduct from an exempt employee’s vacation leave accrual for partial-day absences due to personal, non-medical reasons without jeopardizing the exempt status of that employee.  However, if an employee has exhausted all of their vacation leave, deductions may not be made from the employee’s actual salary.

Background Checks Are Subject to the FCRA’s “Disposal Rule”
A new regulation interpreting the Fair Credit Reporting Act (“FCRA”) took effect June 1, 2005.  The “Disposal Rule” requires that employers take reasonable steps to protect against disclosure or use of “consumer information” obtained through background checks on employees and prospective employees.  In the context of employment, examples of such information include, but are not limited to:

• third party generated criminal background investigations;
• third party acquired credit reports;
• employer created notes or other documents which contain summarized information from such third party generated credit reports and criminal background investigations.

The FCRA’s new regulation suggests that employers disposing of such material burn, pulverize or shred the material in order to prevent its reconstruction or disclosure.  No distinction is made as to the manner in which the information is maintained, and, thus the Disposal Rule would apply to both electronic and more traditional forms of recording information.

California Supreme Court Finds that Office Affairs Resulting in Widespread Sexual Favoritism May Create Hostile Environment for Non-Participating Employees
On July 18, 2005, the California Supreme Court unanimously held that employees may have a valid claim for sexual harassment based upon a consensual relationship between supervisors and subordinates, even if the plaintiffs themselves were never propositioned.

In Miller v. Department of Corrections, the Court condemned consensual workplace relationships if they result in “widespread sexual favoritism” that is severe or pervasive enough to produce a hostile work environment for others who are not participating in the sexual conduct.  Although the Court stated that isolated instances of sexual favoritism may not necessarily be a violation, widespread sexual favoritism sends the message that employees can be treated as “sexual playthings”, and that the only avenue to achieve promotion is to engage in sexual conduct.

The Miller decision suggests that employers may want to more closely examine the implications of consensual relationships between managers and their subordinates and that any allegations of favoritism by employees be aggressively investigated and addressed appropriately.  Employers may also wish to revise written employment policies to make clear that favoritism of this type is not permitted, and may also wish to address this topic during workplace training related to the prevention of harassment and discrimination.

Department of Labor Standards Enforcement Issues Precedent Decision Regarding Missed Meal Periods
The Department of Labor Standards Enforcement (DLSE), in the recent precedent-setting decision in Hartwig v. Orchard Commercial, announced that employee claims for missed meal and rest periods are “penalty” claims, and not claims for “wages.”  The decision clarified the period of limitation to be applied to such claims, and settled a dispute amongst practitioners as to whether a one year statute of limitations applied (for penalties) or a three year statute of limitations (for statutory wage claims) applied.  The Court reasoned that since an award of one additional hour of pay was designed to penalize employers who deny required breaks, the one year statute of limitations should apply.  Employers should know that the one year limitations period is calculated by counting backwards from the date a complaint or charge is filed, and not from the last date the employee worked.

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