Q. I heard that job postings which impose a maximum experience requirement for external applicants may not violate certain provisions of the ADEA, at least in certain Circuits. Is that true?

A. The United States Supreme Court recently declined to review an en banc Seventh Circuit decision in Kleber v. CareFusion Corporation, which ruled that the Age Discrimination in Employment Act (“ADEA”) does not apply to external job applicants who allege that a neutral hiring policy adversely impacted older workers.

Dale Kleber, then 58 years old, applied for an in-house Senior Counsel position in CareFusion’s legal department. The job description provided that applicants must have “3 to 7 years (no more than 7 years) of relevant legal experience.” At the time, Kleber had accrued more than seven years of relevant experience. The company ultimately did not offer Kleber the job and instead hired a 29-year-old applicant who met but did not exceed the job description’s experience requirement. Kleber filed a lawsuit against CareFusion under the ADEA, which prohibits discrimination against those age 40 or older. One of his main arguments was that, although the company’s maximum experience requirement may have appeared neutral on its face, such requirement had a disparate impact on him as an older attorney.

The Seventh Circuit held that the disparate impact provision of the ADEA only applies to “employees,” and not outside job applicants seeking employment such as Kleber. Section 4(a)(2) of the ADEA, which applies to disparate impact claims, makes it unlawful for an employer “to limit, segregate or classify employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s age.” The court found that the plain language of this provision only protects those who have a “status as an employee,” and that Kleber did not have such status, since he was an outside applicant. The court also contrasted the disparate impact section with other portions of the ADEA which expressly cover both employees and job applicants, such as the provision which guides disparate treatment claims (i.e. a company intentionally refusing to hire an applicant because of his or her age). A final issue that the Seventh Circuit addressed was whether the ADEA’s text was similar enough to the text of Title VII that it should follow the same interpretation, as Title VII permits applicants to bring disparate impact claims. The court found that the two statutes are distinguishable.

Given the Supreme Court’s decision declining review, the Seventh Circuit’s ruling continues to remain enforceable and provides employers, at least in Indiana, Illinois and Wisconsin, with a sufficient defense to external applicants’ disparate impact claims under the ADEA. The Eleventh Circuit, which covers Alabama, Florida and Georgia, also has ruled in a manner consistent with the Seventh Circuit, refusing to extend the ADEA’s language on disparate impact to outside applicants. No other Circuit has addressed this issue yet.

One note: While employers may be able to successfully escape ADEA disparate impact claims from outside applicants, state and local anti-discrimination laws may extend to protections for outside applicants. In addition, the decisions of the Seventh and Eleventh Circuits have no effect on ADEA disparate impact claims brought by internal applicants already employed within the company. Furthermore, both internal and external job applicants remain protected under the disparate treatment sections of the ADEA. The Seventh and Eleventh Circuit decisions are therefore limited in nature, and employers across the country should continue to regularly monitor their job postings and hiring practices to comply with federal and state anti-discrimination laws.

Q. Are there new laws that New Jersey employers needs to be aware of?

A. January 2020 was a busy month for New Jersey’s executive branch. Governor Phil Murphy signed into law at least five workplace-related bills, one of which revised the New Jersey mini-WARN Act, one granting state regulators authority to issue stop-work orders for workplace violations, and three affecting worker misclassification.

To read further, click here.

Q: I operate a hotel in New Jersey and heard New Jersey law now requires me to provide panic devices to certain hotel employees. What do I need to know?

A: New Jersey recently enacted legislation that requires hotel employers to provide a “panic button” to individuals “performing housekeeping or room service duties at a hotel” and is employed by a hotel or subcontractor of a hotel. The new law only applies to hotels and other similar establishments containing at least 100 guest rooms. The law became effective on January 1, 2020.

The state legislature found that because of “the unique nature of hotel work, hotel employees are particularly vulnerable when working alone in hotel guest rooms” placing them at increased risk of assault, sexual assault, and sexual harassment. The legislature also found that many hotel employees are “ marginalized members of society with limited means to support themselves and their families, and without adequate support, may feel intimidated to report inappropriate and criminal conduct for fear of repercussions or retaliation from their employers.”

Under the law, a “panic device” is defined as a “two-way radio or other electronic device which is kept on an employee’s person when the employee is in a guest room, and that permits an employee to communicate with or otherwise effectively summon immediate on-scene assistance from a security officer, manager or supervisor, or other appropriate hotel staff member.”

Hoteliers must provide a free panic device to employees assigned to work in a guest room without any other employees present and permit the employee to use the panic device if the employee believes there is an ongoing crime, immediate threat or assault, harassment, or other emergency. Upon activation of a panic device, an appropriate hotel staff member must “respond promptly to the location of the hotel employee” and no adverse action may be taken against an employee who utilizes their panic device.

In addition, hoteliers must:

  1. Keep a record of accusations it receives that a guest has committed an act of violence, harassment, or other inappropriate conduct against a hotel employee and maintain that name on a list for five years; and
  2. Notify employees assigned to work in rooms occupied by guests on the list referenced above and provide employees with the option of servicing that room with a co-worker or not servicing the room at all; and
  3. Report any incident involving alleged criminal conduct to law enforcement.

Hoteliers also must educate their employees about the panic device program and their rights under this new statute. Furthermore, hotel guests must be advise of the panic device program. Hoteliers who fail to provide panic devices are subject to fines of up to $5,000 for first time violations and $10,000 for subsequent violations.

Q: I heard New York is changing its rules around tip credits for some types of employees. What do I need to know?

A:  A tip credit is a concept permitted under the Fair Labor Standards Act (“FLSA”) and many state laws.  A tip credit allows employers to pay employees a cash wage of less than the minimum wage and take a tip credit up to a set amount.  For example, under the FLSA, employers can pay tipped employees a minimum cash wage of $2.13 per hour, and take a tip credit of $5.12 per hour.  If employees receive less than $5.12 an hour in tips, the employer must pay the employee the difference so that an employee always earns at least $7.25 (the minimum wage) per hour.  Regardless of whether an employer takes a tip credit, all tips are the property of the employee.  So, if an employer takes a tip credit and the employee makes more than $5.12 per hour in tips, the additional amount belongs to the tipped employee.

Currently, New York employers are permitted to take a tip credit for employees in miscellaneous industries. Employees covered by the miscellaneous industries wage order are those employees who are not covered by any of the other wage orders (hospitality, agricultural, non-profit, and building services).  Common types of employees covered by the miscellaneous wage order include employees in hair salons, nail salons, and car washes, as well as door-persons, tow truck drivers, valet parking attendants, and dog groomers.  The amount of the tip credit varies depending on: (1) where the employee is (New York City, Long Island & Westchester, or the remainder of New York); and (2) the average amount of tips the employee receives per week.  There is a “low” and “high” tip credit – if an employee’s average weekly tip earnings fall below the low scale, then the employer cannot take a tip credit.  If an employee’s average weekly tip earnings fall between the low and high scale, the employer can apply the low tip credit.  If the employee’s average weekly tip earnings exceed the high scale, then the employer can apply the high tip credit.

Governor Cuomo recently announced that New York is eliminating the tip credit for the miscellaneous industries. The decision is fueled by the New York Department of Labor’s (“NY DOL”) findings that the miscellaneous industries are often those in which wage theft is most prevalent.  In addition to malicious action by employers to underpay employees, the NY DOL found that there is generally confusion about tip credits among both employers and employees, making it difficult to ensure it is properly utilized.

The elimination will occur in two phases – on June 30, 2020, the difference between the minimum wage and current tip wages will be cut in half, and on December 31, 2020, the tip credit will be completely eliminated. For example, for a miscellaneous industry employee in New York City, an employer can currently pay a cash wage of $11.35 – $12.75, and take a tip credit of $2.25 to $3.65, depending on the employee’s weekly tip average.  Beginning June 30, 2020, the employer must pay a cash wage of $13.15 – $13.85 per hour, and can only take a tip credit of $1.15 – $1.85, depending on the employee’s weekly tip average.   Beginning December 31, 2020, the employer must pay a cash wage of $15.00 per hour, and cannot take any tip credit.

Q: What is the current rule on whether an employee can use our company’s email system to distribute union material? Also, are we permitted to require employees to keep workplace investigations confidential without running afoul of the National Labor Relations Act?

A: There are actually two issues that arise from your question, and both were recently addressed by the National Labor Relations Board in its reversal of two Obama-era decisions. Essentially, employers may now beef up restrictions on their employees’ use of company-owned email and other communications systems, subject to certain exceptions. Furthermore, employers may now implement rules requiring confidentiality during the course of workplace investigations, and depending on the circumstances, even beyond the close of the investigation.

In the first case, Caesars Entertainment d/b/a/ Rio All-suites Hotel and Casino, the Board found that an employer’s right to control the use of its email systems supersedes the right of employees to use such systems for union-related communications. This decision overturns Purple Communications, Inc., a much-maligned 2014 decision in which the Board held that workplace rules prohibiting employees from using employer-owned email systems for union business were presumptively invalid. According to the current Board, Purple Communications “impermissibly discounted employers’ property rights in their IT resources while overstating the importance of those resources to Section 7 activity.”

The Caesars Entertainment dispute arose when the union, representing approximately 3,000 employees at a Las Vegas hotel and casino, filed a charge alleging that the employer’s handbook rules violated Purple Communications by prohibiting employees from using the employer’s email system to “send chain letters or other forms of non-business information,” which presumably included union-related emails and other communications. After an administrative law judge rejected the employer’s handbook rule under the Purple standard, the Board issued a call for the parties and interested amici to address several questions, including whether Purple should be overturned, and if so, what standard should replace it. The Board suggested the possibility of returning to the standard introduced in 2007 in Register Guard, where the Board held that employees have no statutory right to use employer equipment.

In a sense, the Board’s rationale for returning to the Register Guard standard is a product of the changes to society at large brought on by technology. As the Board in Caesars explained, employees have other options for union-related communications, given that “in modern workplaces employees also have access to smartphones, personal email accounts, and social media, which provide additional avenues of communication, including for Section 7–related purposes.” As such, the Board found “no basis for concluding that a prohibition on the use of an employer’s email system for non-work purposes in the typical work-place creates an ‘unreasonable impediment’” to employee Section 7 rights. However, the Board recognized that, in certain circumstances, an employer’s email system might be the only viable means of communication among employees. In that case, “an employer’s property rights may be required to yield in such circumstances to ensure that employees have adequate avenues of communication.” The Board declined to clarify the scope of this exception, instead leaving it “to be fleshed out on a case-by-case basis.”

In another case affecting employee Section 7 rights, Apogee Retail LLC, the Board held that a workplace rule requiring employees to maintain confidentiality in the context of an ongoing workplace investigation is presumptively lawful. After the Board’s 2015 decision in Banner Estrella Medical Center, employers were obligated to make a case-by-case determination about whether imposing a particular confidentiality rule during an internal investigation would infringe upon an employee’s Section 7 rights. Reversing that decision, the Apogee Retail Board explained that such confidentiality rules would now be subject to the analysis introduced by the Board in 2017 in Boeing Co., which provided a new standard for determining whether the maintenance of a facially neutral workplace rule is unlawful.

Under Boeing, when analyzing a facially neutral rule that might interfere with the exercise of employee Section 7 rights, the Board considers (1) the nature and extent of the potential impact of the rule on NLRA rights, and (2) the employer’s legitimate justifications for deploying the rule. Following this analysis, the Board places the rule in question in one of three categories—either lawful or unlawful, or somewhere in between. For those rules that present a close call, the Board balances the rule’s effect on employee rights with the employer’s business justifications for the rule.

In Apogee Retail, the workplace rule in question required employees who reported misconduct or otherwise participated in an investigation of such misconduct to maintain confidentiality with respect to the investigation. Employees were warned that violations of the rule could result in disciplinary action. In analyzing the rule, the Board first determined that it, “when reasonably interpreted, would potentially interfere with employees’ exercise of their Section 7 rights” to discuss employee discipline in the workplace “where doing so is not mere griping but rather looks towards group action.” However, when balancing the potential impact on Section 7 rights with the employer’s business justifications, the Board found the employer’s interests outweighed the interests of its employees. Specifically, the employer’s interest in preventing theft and responding quickly to misconduct, as well as in maintaining employee privacy and the integrity of its investigations, benefitted both employers and employees and therefore carried the day.

In addition to finding that it is presumptively lawful for an employer to impose a confidentiality rule during the course of an ongoing investigation, the Board in Apogee Retail took the further step of holding that an employer can impose confidentiality even after an investigation is complete without violating labor laws if its legitimate reasons for requiring confidentiality outweigh the impact on an employee’s Section 7 rights. In other words, rules that extend confidentiality beyond the close of an investigation will be subject to the Boeing analysis.

These two decisions represent a distinct shift away from the Obama-era Board’s positions on these issues. Following Purple Communications, many employers scrambled to rewrite their policies regarding employee email use. Now, after Caesars Entertainment, employers can implement rules that prohibit employees from engaging in any non-work-related use of company technology, unless the use of an employer’s communication systems is the only reasonable means for employees to communicate about union matters. Employers may now require confidentiality during ongoing investigations, although rules that extend confidentiality beyond the close of the investigation will be scrutinized on a case-by-case basis.

In any event, while the more-relaxed standards announced in these two decisions will provide some relief for employers, given the politically mercurial nature of the NLRB, employers may want to file away their Purple and Banner Estrella-compliant policies for future use. As Caesars Entertainment and Apogee Retail illustrate, the Board’s views on any given issue are subject to change with the political winds. As always, it is prudent to consult with a qualified attorney before changing any workplace rules that could impact employee rights under the National Labor Relations Act.

Q: I heard that the Pennsylvania Supreme Court recently issued a major ruling regarding overtime pay. What do I need to know?

A: On November 20, 2019, the Pennsylvania Supreme Court rejected the application of the fluctuating workweek method (“FWW Method”) of calculating overtime under the Pennsylvania Minimum Wage Act (PMWA) and its corresponding regulations. As a result, Pennsylvania employers must pay salaried, non-exempt employees an additional one and a half times the employees’ regular rate of pay for every hour worked over 40 in a workweek. See Chevalier v. Gen. Nutrition Ctrs., Inc., Nos. 22 WAP 2018, 23 WAP 2018 (Pa. Nov. 20, 2019).

Background

In general, non-exempt employees must be paid overtime at one and a half times their regular rate of pay for every hour worked in excess of 40 in a workweek. However, regulations implementing the federal Fair Labor Standards Act (FLSA) specifically permit employers to pay salaried, non-exempt employees using the FWW Method when their number of hours worked fluctuate from week to week. See 29 C.F.R. § 778.114. Under the FWW Method, an employer and employee can agree that the employee will receive a fixed weekly salary as straight time pay, regardless of the number of hours worked in a workweek. In addition to this base straight time salary, the employee is entitled to overtime pay at a rate of one-half the employee’s regular rate of pay. The overtime calculation of one-half the regular rate (rather than one and a half times the regular rate) is based on the principle that the employee’s underlying salary already covers all straight time due for the actual hours worked.

Unlike the regulations implementing the FLSA, however, nothing in the PMWA or its implementing regulations specifically authorizes the use of the FWW Method. In recent years, three different Pennsylvania federal courts rejected the FWW Method under state law, instead holding that employers must pay Pennsylvania employees overtime equal to one and one-half times the employee’s regular rate of pay. Pennsylvania’s highest court had not weighed in on the issue—until now.

The Case

Plaintiff represented a class of non-exempt store managers who were paid a fixed weekly salary plus commissions, regardless of the number of hours they worked in a week. To determine overtime compensation, the defendant utilized the FWW Method. The defendant calculated each manager’s “regular rate” by dividing the manager’s fixed weekly salary by the actual number of hours worked, and then paid overtime at one-half times that regular rate for all hours worked in excess of 40. Plaintiff argued that the FWW Method was not permitted by Pennsylvania law and that she should have been paid one and a half times her regular rate for all hours worked in excess of 40.

The Court held that the FWW Method is not permissible under state law and that salaried non-exempt employees must be paid one and a half times their regular rate for all overtime hours. In coming to its conclusion, the Court cited to the PMWA and its implementing regulations which explicitly provide that each “employee shall be paid for overtime not less than 1-1/2 times the employee’s regular rate of pay for all hours in excess of 40 hours in a workweek.” The Court also found that the promulgation of certain FLSA regulations by the Pennsylvania Department of Labor and Industry regarding other methods of overtime calculation, combined with the Department’s failure to adopt the FWW Method regulation, were strong evidence that the FWW Method is not a permissible means of calculating overtime under Pennsylvania law.

Going Forward

The FWW Method of paying overtime in Pennsylvania has been of questionable legality for some time. The latest Supreme Court decision confirms that employers should not be utilizing the FWW Method of compensation in Pennsylvania—despite the fact that it remains permissible under federal law.

Coincidentally, on the same day that the Supreme Court issued its decision, the Pennsylvania Senate passed a bill amending the PMWA that would, among other things, insert a provision into the Act providing that the wage and hour requirements in the PMWA “shall be applied in accordance with the minimum wage and overtime provisions of the” FLSA and its regulations, “except when a higher standard is specified” under state law.

Since the PMWA does not specifically address the FWW Method, this piece of legislation may ultimately have the effect of making the FWW Method a viable option for Pennsylvania employers to use when calculating overtime pay for their non-exempt salaried employees. While we expect the legislation to ultimately pass the Pennsylvania House and be signed by the Governor, until that happens, Pennsylvania employers should heed the Chevalier decision and not utilize the FWW Method of calculating and paying overtime.

Q: Are there any new cases involving Pennsylvania’s Medical Marijuana Act in the context of employment?

A: Given that state-sanctioned use of medical marijuana is relatively new, there are few cases interpreting Pennsylvania’s medical marijuana law with regard to employment. This is why a recently filed Pennsylvania lawsuit could have a far-reaching impact on employers.

On October 10, 2019, Derek Gsell of Moon Township, Pennsylvania filed a lawsuit against a Pennsylvania electric company (the “Company”) in the Court of Common Pleas of Allegheny County, Pennsylvania, docketed as No. GD-19-014418. Mr. Gsell alleges that the Company improperly rescinded a job offer because he tested positive for THC (the active ingredient in marijuana) in a pre-employment drug test. As he informed the Company, Mr. Gsell possesses a Pennsylvania medical marijuana card, which allows him to legally purchase and use marijuana for medical purposes.

According to the complaint, the Company offered Mr. Gsell employment in August 2019; however, the offer was “contingent upon successful completion of a criminal background check, reference check, and pre-employment drug screen.” Mr. Gsell underwent a pre-employment hair follicle drug test and he was informed that he had “failed” the test due to the detection of THC. The complaint states that written correspondence from the Company informed Mr. Gsell that the job offer was rescinded and the position was “no longer available due to your positive drug screen results.”

In his complaint, Mr. Gsell claims that the Company acted with “malice or reckless indifference” to his rights under Pennsylvania’s Medical Marijuana Act (“PMMA”), which established the state’s medical marijuana program in 2016. Mr. Gsell alleges that his job offer was rescinded solely because he was certified to use medical marijuana, noting that he did not seek to use medical marijuana on the Company’s property or to be under the influence of marijuana while at work.

The PMMA permits the use and possession of medical marijuana in authorized forms by patients with a practitioner’s certificate who suffer from a serious medical condition. Possession is lawful for patients and caregivers who have a valid identification card. The Act provides protections for employees certified to use medical marijuana and in particular, it prohibits employers from discriminating or taking an adverse action against an employee “solely on the basis of the employee’s status as an individual who is certified to use medical marijuana.”

Given the limited issues presented in Mr. Gsell’s one-count complaint, this lawsuit will likely be a good test case for enforcing an employee’s (or a prospective employee’s) rights under the PMMA. The Company has not yet filed a response to the complaint.

We will continue to monitor the case’s progress.  In the meantime, if one of your employees or a prospective employee is a user of medical marijuana and you have concerns about your company’s obligations and/or responsibilities with regard to such use, contact any member of the Pepper Hamilton Labor & Employment team for guidance and advice.

Q: An employee in my company has requested intermittent leave as an accommodation for what he claims is a debilitating “anxiety,” but he has no job performance issues and seems fine to me. Are we required to provide a reasonable accommodation under the ADA for anxiety?

A: The question of whether an employee’s anxiety constitutes a disability under the Americans with Disabilities Act (“ADA”) is rather tricky for employers. Most people experience some level of anxiety on the job and in every day life, but in the absence of clear behavioral indicators, it may be difficult for employers to assess whether an employee’s anxiety rises to the level of a disability as defined by the ADA. However, as a recent decision from a federal court in the Middle District of Tennessee demonstrates, to enjoy the protections of the ADA, your employee’s accommodation request must be grounded on something more than his generalized claim that he has a “debilitating” anxiety disorder.

In EEOC v. West Meade Place LLP, the U.S. Equal Employment Opportunity Commission (“EEOC”) alleged that the defendant, a nursing home, failed to provide a reasonable accommodation to an employee who suffered from an anxiety disorder, and then fired her because of her disability.

The ADA prohibits discrimination on the basis of disability with respect to hiring, compensation, discharge, and other terms, conditions, and privileges of employment. In order to establish a prima facie case of discrimination under the ADA, a plaintiff must show that (1) she is disabled, (2) she is otherwise qualified to perform the essential functions of a position, with or without accommodation, and (3) she suffered an adverse employment action because of her disability.

In West Meade Place, the employer argued that the plaintiff could not establish the first element of the legal standard—that she was disabled. Under the ADA, a “disability” is defined in three ways: (1) a physical or mental impairment that substantially limits one’s ability one or more of the individual’s major life activities of an individual; (2) a record of such an impairment; or (3) being regarded as having such an impairment. Reviewing the evidence in light of this definition, the court found that the plaintiff was unable to satisfy her prima facie burden and granted summary judgment to the defendant.

First, the plaintiff could not show that her condition substantially limited her ability to perform her job. The EEOC’s plan to rely on testimony from the employee’s physician on this point backfired during the physician’s deposition. After stating on an FMLA form that the employee could not work during her anxiety “flare-ups,” the physician admitted that, in lieu of a medical opinion, she signed the FMLA form simply because the employee asked her to do it. Given the scant medical evidence to support plaintiff’s medical condition, the court rejected the agency’s argument that one or more of the employee’s major life activities were “substantially limited” by her anxiety.

In addition, the plaintiff’s contradictory testimony undermined the EEOC’s position that the employee had a record of impairment. On the forms she completed at the outset of her employment, she indicated that she had used an anti-anxiety medication and affirmed that she had issues with anxiety. However, she also wrote on the forms that she had never been treated for anxiety. As such, the court found the onboarding documents failed to establish that the plaintiff had a history of anxiety of such severity that it substantially limited on or more of her major life activities.

Likewise, the EEOC’s argument that the plaintiff was regarded as having an impairment by the employer failed. The court explained that, rather than simply alleging that the employer was aware of her symptoms, the plaintiff must instead show that the employer regarded her as “impaired” within the meaning of the ADA. An employee’s statement to management that she suffered from anxiety may not be enough. As the nurse manager explained when asked whether she was aware that the plaintiff had a disability, just because an employee “said she had anxiety, that doesn’t make it a disability. I have anxiety. It’s not a disability.”

Given that the plaintiff could not meet the ADA’s definition of “disabled,” she failed to establish a prima facie case of either on either her discrimination or failure-to-accommodate claims.

By nature, anxiety is somewhat difficult to assess, and thus employers must take care when responding to an employee’s request for an accommodation for an anxiety condition. In the absence of supporting evidence, an employee’s bald assertion that he or she suffers from an anxiety disorder probably is not enough to meet the ADA standard. Thus, an employer should carefully analyze any documents provided by the employee’s health care provider to determine whether the diagnosis indicates that the anxiety amounts to a “mental impairment” as contemplated by the statute. Also, employers should conduct a thorough review of the employee’s file to ascertain whether the employee identified the medical condition at the outset of employment or afterwards, thereby putting the employer on notice. In addition, employers should take a holistic view of the employee’s overall engagement with the company to determine whether the company regarded the employee as disabled. As always, to mitigate the risk of liability, employers should thoroughly review the facts and available documents with an attorney who has experience in analyzing ADA issues, prior to denying an employee’s request for an ADA accommodation.

Q.  What are my company’s obligations under the California Consumer Privacy Act?

A. The California Consumer Privacy Act (CCPA) will take effect on January 1, 2020. On or before that date, businesses that employ California residents, retain California residents as independent contractors, or receive job applications from California residents must provide those individuals with notices detailing (1) the categories of personal information that the employer collects about them and (2) the purposes for which the personal information will be used. The CCPA requires that businesses provide these notices “at or before the point of collection” of personal information.

“Personal information” is defined broadly in the CCPA and includes items such as Social Security numbers, bank account numbers, education and employment history, characteristics of a protected classification under California or federal law (such as race, religion, gender, disability and age), biometric information, medical and health insurance information, and certain metadata, such as device IP address. In the employment/independent contractor context, businesses collect personal information for purposes such as onboarding, conducting background checks, managing the employment/contractor relationship (including payment of wages/fees, time records, direct deposit authorization, etc.), and preparing legally required records (including I-9 and EEO-1 forms). Businesses should consider incorporating the CCPA notice in the following documents and locations, as well as posting it where other notices are posted:

  • employee handbooks
  • offer letters
  • other new hire paperwork
  • employment agreements
  • restrictive covenant agreements
  • online job application portals.

In addition to requiring notice to individuals, the CCPA’s notice requirement extends to “personal information” related to households, which would include medical and health insurance information about an employee’s beneficiaries. Businesses should assess how to comply with their obligation to notify households in the absence of specific guidance, which hopefully will be forthcoming.

Although many employment-related requirements in the original CCPA were suspended until January 1, 2021 by the CCPA amendments, the notice requirement and the private right of action in the event of a data breach are still in effect. Consequently, businesses should properly secure employee, applicant and independent contractor-related personal information to mitigate risk of liability, and develop and distribute mandated notices at or before all points where employee, job applicant and independent contractor personal information is collected. Businesses also should consider what operational steps will be necessary to afford California resident employees, applicants and independent contractors full CCPA rights as of January 1, 2021. Pepper Hamilton LLP can assist businesses in complying with the CCPA.

Q.  As a franchisor, could I potentially be held liable for the wage and hour violations committed by franchisees of my organization against their employees?

A.  On October 1, 2019, a three-judge panel of the Ninth Circuit Court of Appeals ruled that McDonald’s Corporation was not liable as a joint employer for any alleged wage and hour violations committed against its California franchisee’s employees because McDonald’s did not exercise enough control over them.

In Salazar v. McDonald’s Corp., a class of approximately 1,400 restaurant workers at McDonald’s franchises in California alleged that they were denied overtime premiums, meal and rest breaks, and other benefits in violation of the California Labor Code. They argued that McDonald’s and itsCalifornia franchisee were joint employers such that McDonald’s should be held liable for the violations. In support of their joint employer theory, the restaurant workers conveyed that McDonald’s required the franchisees to use specific computer systems for timekeeping which allegedly caused them to miss out on receiving overtime pay, and to send their managers to McDonald’s-sponsored trainings, which included topics on wage and hour policies. On the other hand, the facts also showed that the California franchisees were solely responsible for setting wages, interviewing, hiring, firing, supervising, and paying all of its employees.

The Ninth Circuit ultimately determined McDonald’s was not a joint employer of its franchisees’ workers for purposes of wage and hour liability. Its decision narrowly focused on the California Supreme Court’s 2010 ruling in Martinez v. Combs, which addressed three alternative definitions for determining whether an employment relationship exists: (1) exercising “control” over employees’ wages, hours, or working conditions; (2) “suffering or permitting” employees to work; or (3) creating a common law employment relationship. Under the “control” definition, the Ninth Circuit held that McDonald’s did not have the necessary control over “day-to-day aspects” of working conditions, such as hiring, direction, supervision, or discharge; rather, McDonald’s only had direct control over quality, such as operational branding. It also found that McDonald’s did not fall under the “suffer or permit” definition, which “pertains to responsibility for the fact of employment itself. The question under California law is whether McDonald’s is one of Plaintiffs’ employers, not whether McDonald’s caused Plaintiffs’ employer to violate wage-and-hour laws by giving the employer bad tools or bad advice.” For similar reasons, the Ninth Circuit panel held that McDonald’s could not be considered an employer under California common law because its quality control and maintenance of brand standards was not evidence that it had the requisite level of control over the workers’ employment to be deemed a joint employer.

The Ninth Circuit also rejected plaintiffs’ novel legal argument that McDonald’s was liable for wage and hour violations under an ostensible-agency theory, as it noted the term “agent” under state law only applies to an employer that exercises control over the wages, hours, or working conditions of workers, which was not the case here. In addition, the Court ruled that the workers’ negligence claim based on McDonald’s alleged failure to prevent the violations failed, as the claim was preempted by California’s wage and hour statutes and plaintiffs could prove neither the damages nor the duty elements required under a negligence theory of liability.

The Ninth Circuit ruling is significant for franchisors and other affiliated companies of employers, as it clarifies that a joint employment relationship under California wage and hour laws primarily depends on whether the company exerts direct control over day-to-day working conditions, such as hiring, direction, supervision, and discharge. The decision was issued only one week after a California appellate court ruled that Shell Oil Products US was not a joint employer for purposes of California wage and hour violations based on the same test employed by the Ninth Circuit. In April 2019, the U.S. Department of Labor proposed the enactment of a similar control test for determining joint employer liability under the Fair Labor Standards Act. Nonetheless, companies are advised to consult with experienced labor and employment attorneys in order to stay abreast of the evolving tests used to determine joint employment liability.