As we predicted in our year-end post on civil and criminal enforcement trends, 2018 is already off to strong start in opioid-related enforcement against individual providers and associated practices.  Earlier this month, the Department of Justice (DOJ) announced that a Michigan physician, Dr. Rodney Moret, was sentenced to 75 months in prison for his role in conspiracies to distribute prescription pills illegally and to defraud Medicare. The conduct alleged against Dr. Moret is particularly extreme, but nevertheless reflects the government’s commitment to ferreting out opioid-related misconduct.

The government contended that Dr. Moret was involved in a scheme in which he was the sole practitioner at a medical clinic that purported to be a pain management and HIV infusion clinic but in fact was just a “pill mill.” As part of this scheme, Dr. Moret allegedly would conduct a cursory (if any) examination of patients, which were billed to Medicare, before writing a prescription for controlled substances. Once those prescriptions were filled, patient marketers would sell those drugs on the street in Southeast Michigan. This clinic operated from 2010 to 2015.

As part of this scheme, Dr. Moret was alleged to be responsible for illegally distributing over 700,000 dosage units of Hydrocodone, more than 240,000 dosage units of Alprazolam, and more than 2 million milliliters of promethazine with codeine cough syrup. These drugs had a street value of more than $15 million. Dr. Moret was also responsible for over $6 million in health care fraud. He pled guilty to one count each of conspiracy to commit health care fraud and conspiracy to illegally distribute prescription drugs. In its comments on this sentencing, the U.S. Attorney’s Office for the Eastern District of Michigan made clear that one of the government’s main concerns with Dr. Moret’s conduct was his role in exacerbating the opioid crisis in his community.

A few weeks before DOJ announced Dr. Moret’s sentencing, DOJ announced that a Tennessee chiropractor and a pain clinic nurse practitioner had entered into settlement agreements to resolve allegations under the False Claims Act that they had improperly billed Medicare and TennCare for painkillers, including opioids.

Matthew Anderson, a chiropractor, and his management company, PMC, LLC, managed four pain clinics in Tennessee. Anderson and PMC entered into a settlement agreement to pay $1.45 million to resolve the claims that from 2011 through 2014 they caused pharmacies to submit requests for Medicare and TennCare payments for pain killers, including opioids, which were dispensed based upon prescriptions that had no legitimate medical purpose. The government also alleged that (1) Anderson caused all four clinics to bill Medicare for upcoded claims for office visits that were not reimbursable at the levels sought and (2) Anderson and PMC caused the submission of Medicare claims for services provided by two nurse practitioners who were not meeting applicable supervision requirements.

The United States will receive $1,040,275 of the $1.45 million at issue, while the State of Tennessee will receive $163,225. Anderson and PMC also agreed to be excluded from billing federal health care programs for five years. In addition, the settlement agreement requires Cindy Scott, a nurse practitioner from Nashville, to pay $32,000 and to surrender her DEA registration until October 2021.

While enforcement focus in the first weeks of 2018 appears to have remained largely on individual providers and practices, it remains to be seen whether the government (and whistleblowers) will turn their attention to larger companies and providers. As we reported in our year-end post, in September of last year Galena Biopharma, Inc. agreed to pay $7.55 million to resolve allegations under the FCA that it paid kickbacks to physicians to encourage them to prescribe an opioid product (Abstral). Last month, DOJ announced that Costco Wholesale agreed to pay $11.75 million to settle allegations that its pharmacies violated the Controlled Substances Act by improperly filing prescriptions for controlled substances. Although the allegations against Costco involved lax controls surrounding compliance with requirements related to filling prescriptions (and not the same kind of misconduct related to opioid prescriptions alleged against other providers), the government emphasized that it was undertaking its enforcement efforts with an eye toward the opioid epidemic.  The U.S. Attorney for the Eastern District of Michigan commented that “[i]n light of the prescription pill and opioid overdose epidemic we are seeing across the country, compliance with regulations governing pharmacies is more important than ever” and applauded Costco for working with DEA and shoring up its compliance efforts “to ensure that prescription pills do not end up on the street market.”

This article was written by Samantha P. Kingsbury of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

For more health related news, follow our Health Law Twitter @NatLawHealthLaw

Congress recently passed and President Trump signed a comprehensive two-year defense spending budget agreement for fiscal years 2018 and 2019 to prevent an extended federal government shutdown. The legislation also contained a shortterm continuing resolution (“Continuing Resolution”) to fund federal programs further, including the EB-5 Program, through March 23, 2018. The Continuing Resolution contained a framework of a long-term budget accord, and thus, an omnibus spending bill is expected ahead of the March 23 deadline. In fact, a group of Republican senators on Sunday night released a version of President Trump’s immigration proposal ahead of a floor debate on immigration this week.

With regard to the EB-5 Program, the continuing resolution marks another “kicking of the can down the road” by a short-term resolution without change, something we have seen continually since September 2015. Indeed, the last longterm extension occurred in September 30, 2012, when President Obama signed S.3245, which extended the EB-5 Program for three years through September 30, 2015.

What will happen to the EB-5 Program during these ensuing six weeks and thereafter? The short answer is: it is not entirely clear. Numerous reform bills to the EB-5 Program in the House and Senate have circulated between 2015 and 2017; most of these have grown stale. Several Congressional proposals on the topic of immigration have emerged in 2018, but none of them have addressed the EB-5 Program.

Still Relevant Pending EB-5 Legislation

Participation in the EB-5 Program by direct investment in a job-creating enterprise has not required renewal since created by Congress in 1990 as a permanent program. What has been a greater debate in recent years is the Immigrant Investor Pilot Program (“Pilot Program”) that Congress created in 1992 to stimulate additional interest in the EB-5 Program, which involves investing through “regional centers” rather than directly in a job-creating enterprise. The appeal of the Pilot Program is the ability to include indirect and induced jobs as well as direct jobs, which allows a greater number of worthy projects to utilize funding from the EB-5 Program, such as the construction of residential housing, solar and wind farms, infrastructure construction and improvements and other beneficial projects that do not command many on-site direct jobs.

With the Pilot Program’s profound growth, especially in the years following the Great Recession, concern grew in Congress of inadequate governance. With the approaching sunset of the Pilot Program’s three-year renewal in September 2015, numerous House and Senate bills proposed either major overhaul or minor reform measures, certain of which caused quite a commotion in the EB-5 community though ultimately none were enacted. Since then, many more proposed bills have surfaced to reform the Pilot Program and many of these have faded away as well, though a few bills proposed in 2017 remain relevant in terms of what happens next to the EB-5 Program:

• The American Job Creation and Investment Into Public 4 Works Reform Act of 2017 (H.R.3471) introduced by Representatives Brian Fitzpatrick (R-Pennsylvania) and Dwight Evans (D-Pennsylvania) on July 27, 2017, would extend the Pilot Program until September 30, 2022, increase the minimum investment amounts from $500,000 and $1 million to $800,000 and $1.2 million. The new minimum amount of $800,000 would apply to projects in a targeted employment area (“TEA”) and investments in an infrastructure project or a manufacturing project.
• The American Job Creation and Investment Promotion Reform Act of 2017 introduced by Senator Grassley (R-Iowa) and Senator Leahy (D-Vermont), circulated as draft legislation in April 2017, would increase the minimum investment amounts from $500,000 and $1 million to $800,000 and $1 million and would extend the Pilot Program to September 30, 2022, create EB-5 visa set asides for rural and priority urban projects and redefine TEAs to cover rural and priority urban areas and closed military bases.
• The EB-5 Immigrant Investor Visa and Regional Center Program Comprehensive Reform Act of 2017 introduced in April 2017 by Senator Cornyn (R-Texas) would extend the Pilot Program to September 30, 2023, would increase the minimum investment amounts from $500,000 and $1 million to $800,000 and $925,000, create EB-5 visa set asides for rural projects and redefine TEAs to create three categories (i) distressed rural; (ii) distressed urban; and (c) closed military bases.

The foregoing represents only a handful of the bills pending but are germane because they were more recent and may influence the outcome.

What Happens Next for EB-5?

While most eyes are following the activity of the omnibus immigration bills circulating in Congress, including Mitch McConnell’s (R-KY) initiating of the Broader Options for Americans Act (H.R. 2579) to proceed to the Senate, a more compelling prospect to the EB-5 community that could lead to assorted changes to the Pilot Program arises from meetings Senator Grassley (R-Iowa) and Representative Bob Goodlatte (R-Virginia), Chairs of the Senate and House Judiciary Committees had last fall with United States Citizenship and Immigration Services (“USCIS”). Senator Grassley explained his impatience with the delays in enacting reform to the EB-5 Program and the urgency to pass a rule by February 2018, which would become effective within 30 to 90 days later. USCIS has likewise announced that if Congress does not enact reform by April 2018, USCIS will enact its own changes.

Among the changes sought by Senators Grassley and Representative Goodlatte include modification of the TEA concept to include rural and urban distressed/high employment areas utilizing a single-census tract analysis. The proposal would increase the minimum investment amount to $925,000 for projects in the new definition of TEAs and increase all other projects by $25,000 to more than $1 million. Other rumored proposals include visa set-asides for rural projects, minimum direct job requirements, and permission for EB-5 petitioners to retain their original priority date in the event of a petition amendment, among other sundry amendments to the EB-5 Program’s filing and interview procedures.

Further discussions have been limited to a tight circle thus it is unclear what the final rules will contain but they are expected not to be sweeping and to be released sometime between the coming two weeks and April with a transition time of 30 to 90 days thereafter. The inner circle of EB-5 stakeholders have been advocating intensely behind the scenes with lawmakers with the hope that the reform measures result in increased visa set asides and modest minimum investment amount increases or a gradual phase-in to avoid impairing this vital program. We will keep on top of developments and provide additional alerts as news develops.

This article was written by Debbie A. Klis of Polsinelli PC

For more immigration news, follow our Immigration Law twitter @NatLawImmigrate

As previously reported here, in November 2017, following the Office’s of Management and Budget (“OMB’s”) “immediate stay” of the EEO-1 pay data reporting requirement, the National Women’s Law Center (“NWLC”) and the Labor Council for Latin American Advancement (“LCLAA”) filed a lawsuit to reinstate the EEO-1 pay data reporting requirement, asserting OMB lacked the legal basis to stay the pay data reporting requirement.

This week, the OMB struck back with a motion asking the court to dismiss the NWLC/LCLAA lawsuit.  OMB argued it has continuing authority to review the pay data collection requirement.  Moreover, OMB contended the NWLC and LCLAA do not have standing to sue because neither have been impacted by the OMB’s decision to stay the requirement pending further review. OMB further argued that, in any event, the lawsuit was premature because it has not yet made a final decision on EEO-1 pay data collection.

Regardless of the ultimate fate of EEO-1 pay data collection, gender and race pay gap issues continue to be an area of focus.

This article was written by F. Christopher Chrisbens of Jackson Lewis P.C.

For more Labor News, follow our Labor Law Twitter @NatLawEmployer

As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.

The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far.  Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA.  In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.

Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment.  The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.”  Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.

As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology.  There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.  However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it.  Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA.

Here, Monday’s Indictment begins by stating that three of the five Venezuelan defendants were “foreign officials” as that term is used in the FCPA. The Indictment then alleges, in detail, how the defendants laundered the proceeds of the aforementioned PDVSA bribery scheme through numerous financial transactions in the names of various companies.  They are alleged to have worked together to provide banks with false justifications for the bribe payments and, in one instance, used the bribe proceeds to purchase a condominium in Miami in the name of a company controlled by a relative.  All five defendants are alleged to have engaged in at least one conspiracy to commit money laundering, and each is charged with one or more counts of money laundering.  The Specified Unlawful Activity, or SUA, underlying the money laundering counts is the FCPA.  Thus, the FCPA supports money laundering counts in instances in which the FCPA itself could not be charged directly.

The paradox of the latest development in this investigation is intriguing. The investigation was and remains, in its essence, a prototypical FCPA case, in which DOJ is seeking to combat the bribery of foreign officials.  Yet, without the money laundering statute, the U.S. would be unable to prosecute some of the individuals central to the alleged activities.  This paradox is highlighted in the Indictment’s lone count that does not allege a violation of the money laundering statute, Count Two.  There, the Indictment alleges a conspiracy to violate the FCPA, but only names the two defendants who were not “foreign officials.”  In other words, the Indictment implicitly acknowledges that a majority of the defendants are outside the reach of the FCPA statute.  Thus, the money laundering statute acts not simply as a supplement to the FCPA, but as an instrumental component of DOJ’s strategy to prosecute wrongdoing at the highest levels.

The unsealing of the Indictment comes at a tumultuous time in the U.S.-Venezuela relationship and amidst what is described as a time of economic crisis in that country.

Last year, we blogged about the U.S. Department of Treasury’s designation of Venezuela’s Executive Vice President, Tareck Zaidan El Aissami Maddah (“El Aissami”), as a Specially Designated Narcotics Trafficker under the Foreign Narcotics Kingpin Designation Act.  Through this designation, U.S. individuals and entities are prohibited from dealing with El Aissami and certain named entities to which he is allegedly connected, and any assets held by him or those entities in the U.S. are frozen.

More recently, U.S. Secretary of State Rex Tillerson announced earlier this month that the U.S. is considering banning sales of Venezuelan oil in the United States and halting the refining of Venezuelan crude by U.S. companies.  Venezuela, for its part, recently announced its President’s plan to float a new cryptocurrency backed with the country’s oil reserves in an attempt to fend off economic distress.  That plan was met with resistance from Venezuela’s parliament, the U.S. Treasury Department and investors worldwide.  Notably, the article linked above quotes one commentator as predicting this new crytocurrency would “become a money laundering tool for well-connected people” within the President’s regime.

While some commentators believe Venezuela’s frayed relationship with the U.S. may have played some role in the decision to pursue the five Venezuelan executives named in Monday’s Indictment, the message here is universal. An unwary foreign official receiving bribes can easily fall within the ambit of the U.S. money laundering statute.  And the effort to find and arrest any such foreign official is not confined to the U.S. borders.  Perhaps this was best stated by a commentator referencing the October 2017 arrests in Spain:  “There are lots of people that are not sleeping well tonight.”

This article was written by Evan W. Krick of Ballard Spahr LLP

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The Louisiana Fifth Circuit Court of Appeal has held that painters may be treated as independent contractors if they bring some of their own tools, control their own schedules, and make decisions on how to complete the work for which they have been hired.

Background

In Ocampo v. Maronge, No. 17-CA-403 (December 27, 2017), plaintiffs Javier Ocampo and Dennis Ordonez asserted claims for unpaid wages following discharge pursuant to the Louisiana Wage Payment Act (LWPA). A claim under the LWPA requires that the claimant be an “employee.”

Ocampo and Ordonez were hired by Nicole Maronge to perform painting on a residential property in Napoleonville, Louisiana. Maronge claimed that Ocampo and Ordonez were hired to work from Tuesday February 25, 2014, through Friday February 28, 2014. Ocampo and Ordonez testified that they were not informed of an initial deadline to complete the job.

Maronge supplied Ocampo and Ordonez with a ladder, as well as other materials to complete the job, including “sheetrock, paint, primer, caulk, tape, spackling and other similar items.” Ocampo and Ordonez supplied some of their own tools, including brushes, rollers, buckets, and drop cloths.

After arriving at the Napoleonville property, Ocampo and Ordonez learned the job would entail more work than painting, including floor and garage demolition. By the end of February 28, 2014, they informed Maronge that they were not finished with the job, but that they could complete the job by March 2, 2014, with the assistance of an additional laborer. Maronge agreed. Ocampo and Ordonez thereafter worked through March 2, 2014, and completed the job except for the trim painting. They did not return to the jobsite on March 3, 2014, and Maronge hired other laborers to finish the job.

Ocampo and Ordonez claimed in their lawsuit that Maronge never paid them for the hours they worked for her. Specifically, they claimed they were each owed $17 an hour for 62 hours worked on the Napoleonville property, as well as penalties and attorneys’ fees resulting from Maronge’s failure to timely pay their wages.

Maronge did not dispute that Ocampo and Ordonez were owed money for the work they performed. Instead, Maronge disputed the hourly rate and number of hours they worked. Maronge claimed that they were each owed $15 per hour for only 45 hours worked. Maronge also disputed that plaintiffs were her “employees” under Louisiana law.

After discovery, Ocampo and Ordonez filed a motion for partial summary judgment urging the court to find that they were Maronge’s “employees” as a matter of law. The district court denied their motion. Thereafter, the matter proceeded to trial, where the district court found Ocampo and Ordonez to be independent contractors. They subsequently appealed the court’s denial of their motion for partial summary judgment, as well as the court’s judgment finding them to be independent contractors, amongst other issues.

The Louisiana Fifth Circuit’s Analysis

On appeal, the Louisiana Fifth Circuit Court of Appeal affirmed both rulings, emphasizing the independent nature of the plaintiffs’ jobs. The court explained that the essence of the employer-employee relationship is the “employer’s right to control the employee.” As a result, the court declared that to prevail on their motion for partial summary judgment, Ocampo and Ordonez were required to prove that the degree of control Maronge exerted over them rose to the necessary level to create the employer-employee relationship.

The court applied the five factor employee-employer test first enumerated by the Louisiana Supreme Court in the seminal Hickman v. South Pacific Transport Company case from 1972. The court asked: (1) whether there was a valid contract between the parties, (2) whether the plaintiffs used nonexclusive means in accomplishing the work, (3) whether the defendant controlled how the work would be performed, (4) whether there was a specific price for the project, and (5) whether the work was for a certain time or subject to termination by either party at their will.

In affirming the denial of the plaintiffs’ motion for partial summary judgment and the district court’s conclusion that the plaintiffs were independent contractors, the court enumerated the following facts to support its conclusion: the plaintiffs set their own schedules, Maronge did not direct the plaintiffs in how to perform their work, the plaintiffs supplied some of their own tools and techniques, and Maronge was not present on the jobsite. At the same time, the court deemphasized or ignored the ways in which Maronge directed the work to be performed, the tools Maronge provided for the job, the complexity of the actual work performed, and the March 2 deadline for completion of the work that the plaintiffs acknowledged but ignored.

As a result, the Louisiana Fifth Circuit declared that the district court was not “manifestly erroneous or clearly wrong” in classifying the plaintiffs as independent contractors.

Key Takeaways

Ocampo indicates that the sophistication of work performed may not control the existence of an employer-employee relationship. In this instance, the plaintiffs were only painting and demolishing property and the majority of their “tools” were provided by the defendant. Nonetheless, the court found the plaintiffs to be independent contractors. As a result, the LWPA did not apply and thus penalties and attorneys’ fees for late payment of earned wages were not recoverable.

This article was written by Andrew P. Burnside and Hal D. Ungar of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

The 2017 California Legislative Session produced quite a number of new laws that will substantially impact the state’s employers. The following is a discussion of the major new labor and employment laws that took effect on January 1, 2018.

AB 168 – Prohibited Use of Prior Salary

AB 168¹ (Eggman – Stockton) was signed on October 12, 2017. This bill adds Section 432.3 to the California Labor Code primarily to preclude the use of salary history information in employment situations.

First, the bill prohibits an employer from relying upon salary history information for any applicant for employment when deciding whether to offer employment or what salary to offer to that job applicant.²

Second, an employer is prohibited from seeking any salary history information, which is defined to include compensation and benefits, about any applicant for employment. This prohibition applies personally or through an agent, whether orally or in writing.³

Third, an employer must provide a job applicant with a “pay scale for a position” if the applicant makes a “reasonable request”⁴ for such a pay scale.⁵

Fourth, this Labor Code section does not apply to salary history information that is otherwise disclosable to the public pursuant to federal or state laws, such as the California Public Records Act or the federal Freedom of Information Act. As such, this provision would not apply to salary information available for public employees who are seeking a new position.⁶

Fifth, this Labor Code section applies to all public and private employers, and specifically includes state and local governments as well as the Legislature.⁷

Sixth, nothing in this new law prohibits a job applicant from “voluntarily and without prompting” disclosing his or her salary history information to any prospective employer. In such a case, an employer is not prohibited from considering or relying on that voluntarily disclosed salary history information in determining that job applicant’s salary.⁸

Finally, the new law reiterates existing state law found in Labor Code Section 1197.5 that prohibits prior salary, by itself, to justify any disparity in compensation.⁹

As new provisions of the Labor Code, they are subject to private enforcement through the Private Attorneys General Act (PAGA). PAGA allows representative actions for violations of the Labor Code. Even though the Governor vetoed an earlier version of this bill, this year he signed it in a ceremony with the Legislative Women’s Caucus despite strong objections by the California business community.

The new law applies to private and public employers; government employees often have their salary information available as a matter of the public record. AB 168 was opposed by all of the major business organizations, led by the California Chamber of Commerce.

Employers in California will need to revise their job applications and any online materials to remove any references to prior salary history. In addition, those conducting job interviews and recruiting must be properly trained in the new law.

AB 450 – Protections from Federal Immigration Agents

AB 450¹⁰ (Chiu – San Francisco) was signed on October 4, 2017 dealing with immigration worksite enforcement actions.

This bill added Government Code Section 7285.1 to prohibit an employer (or a person acting on the employer’s behalf), “except as otherwise required by federal law,” from providing “voluntary consent” to an immigration enforcement agent to enter any nonpublic areas of a place of labor. However, this prohibition does not apply if the immigration enforcement agent provides a judicial warrant.¹¹

 Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If a court finds that an immigration enforcement agent was permitted to enter a nonpublic area of a place of labor without the employer’s consent, then this civil penalty is not assessed.¹²

There is also an exception if the employer (or agent) takes the immigration enforcement agent to a nonpublic area where employees are not present for verifying whether the immigration enforcement agent has a judicial warrant. But consent to search nonpublic areas cannot be given in that instance.¹³

The California Labor Commissioner and the California Attorney General have “exclusive authority” to enforce this new section, and they must do so through civil action. Any civil penalties recovered by them are deposited in a state fund.¹⁴ The new law specifies that his section applies to both public and private employers.¹⁵

In addition, this bill added Section 7285.2 to the Government Code to prohibit an employer (or a person acting on the employer’s behalf), “except as otherwise required by federal law,” from providing voluntary consent to an immigration enforcement agent to “access, review, or obtain the employer’s employee records without a subpoena or judicial warrant.” An employer (or agent) may challenge the validity of either document in federal court.¹⁶

However, this prohibition does not apply to “I-9 Employment Eligibility Verification forms and other documents for which a Notice of Inspection has been provided to the employer.”¹⁷

Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If a court finds that an immigration enforcement agent was permitted to enter access, review or obtain the employee records without the employer’s consent, then this civil penalty is not assessed.¹⁸

The California Labor Commissioner and the California Attorney General have “exclusive authority” to enforce this new section, and they must do so through civil action. Any civil penalties recovered by them are deposited in a state fund.¹⁹ The new law specifies that his section applies to both public and private employers.²⁰

This new law also added a new to the Government Code to provide that “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.²¹

This new law added Section 90.2 to the Labor Code to require an employer, “except as otherwise required by federal law,” to provide a notice to each current employee of any inspections of I-9 Employment Eligibility Verification forms or other employment records conducted by an immigration agency. This notice (including specified information) must be posted in the same language that the employer normally uses to communicate employment-related information to employees, and the notice must be provided without 72 hours of receiving notice of that inspection. In addition, similar written notice must be given within 72 hours to an employee’s authorized representative.²²

On or before July 1, 2018, the Labor Commissioner is required to develop a template posting that employers may use to comply with this notice requirement.²³ An affected employee must be provided a copy of the Notice of Inspection if a reasonable request is made of the employer.²⁴

In addition, an employer, “except as otherwise required by federal law,” must provide a copy to each current, affected employee (and his or her authorized representative) of the written immigration agency notice that provides the results of the inspection of the forms and records. This must be done within 72 hours of its receipt. This information must include any “written notice of the obligations of the employer and the affected employee arising from the results of the inspection.” This notice must contain specified information and must be delivered by hand at the workplace, or by mail and email if that is not possible.²⁵ An “affected employee” is defined as an employee identified by the immigrant agency inspection results to be someone who may lack work authorization or whose paperwork is identified as having deficiencies.²⁶

Any employer who violates this new section will be assessed a civil penalty of $2,000 to $5,000 for a first violation and $5,000 to $10,000 for each subsequent violation. If the federal government “expressly and specifically directs or requests” that this notice is not provided to an employee, then this civil penalty is not assessed. Only the Labor Commissioner recovers this penalty.²⁷

An “employee’s authorized representative” is defined as an exclusive collective bargaining representative.²⁸ This is contained in Section 90.2(d). The new law specifies that his section applies to both public and private employers.²⁹

Here again, “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.³⁰

This new law added Section 1019.2 to the Labor Code to prohibit either a public or a private employer, “except as otherwise required by federal law,” from reverifying the employment eligibility of a current employee at a time or in a manner not required by federal law.³¹

Any employer who violates this new section will be assessed a civil penalty up to $10,000. Only the Labor Commissioner recovers this penalty.³² Here again, “nothing in this chapter shall be interpreted, construed or applied” to either restrict or limit an employer’s compliance with an agreement governing the use of the federal E-Verify system.³³

As one might expect, this bill created a fair amount of debate during the just-concluded Legislative Session. Most of the business community went neutral in the end after the author took numerous amendments to deal with employer concerns. This bill was a high priority for its sponsor, the Service Employees International Union.

Employers in California will need to inform and train their personnel to deal with immigration enforcement agents, such as to request warrants and respond to ICE agents who seek access to either employee records or the workplace. Employers will also need to take precautionary actions in order to comply with the new law’s provisions and to prevent being assessed substantial monetary penalties.

AB 1008 – Prohibited Use of Criminal History

AB 1008³⁴ (McCarty – Sacramento) was signed on October 14, 2017 to address employment discrimination based upon criminal conviction history. The bill takes effect on January 1, 2018. Section One of the bill contains numerous findings and declarations of the Legislature.

Among other provisions, it notes that 29 states and over 150 cities and counties have adopted “ban the box” laws and 9 states and 15 cities have adopted fair chance hiring laws that apply to both public and private employers. The bill also recites that roughly 7 million California residents have an arrest or conviction.³⁵

 This new law adds Section 12952 to the Government Code to provide that it is “an unlawful employment practice” for an employer with 5 or more employees to:

• Include on any employment application any question that seeks the disclosure of an applicant’s conviction history, prior to the employer making a conditional offer of employment to the job applicant;
• Inquire into or consider the conviction history of the job applicant until after the employer has made a conditional offer of employment;
• Consider, distribute or disseminate information about any specified results while conducting a conviction history background check; and
• Interfere with, restrain or deny the exercise of any right under this new code section.³⁶

This new law also requires an employer, when intending to deny a job applicant a position solely or in part because of that applicant’s conviction history, to make “an individualized assessment” of whether the job applicant’s conviction history has a “direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.”³⁷

In making this particularized assessment, which the employer may commit to writing (although not required to do so), the employer must consider the following factors:

• The nature and gravity of the offense or conduct;
• The time that has passed since the offense or conduct and completion of the sentence; and
• The nature of the job held or sought.³⁸

In addition, this new law provides that, if an employer makes a preliminary decision that the job applicant’s conviction history disqualifies the applicant from employment, then the employer must notify the job applicant of this preliminary decision in writing. That written notification may justify or explain the employer’s reasoning. The notification must contain specified information.³⁹

Thereafter, the job applicant must be provided at least 5 business days to respond to the written notice provided by the employer before a final decision is made. If the job applicant notifies the employer in writing that he or she disputes the report and that he or she is obtaining evidence to support the dispute, then the job applicant must be given another 5 business days to respond to the notice.⁴⁰

Thereafter, the employer must consider information submitted by the job applicant before making a final employment decision.⁴¹ If the employer makes a final decision to deny a job applicant solely or in part because of the job applicant’s conviction history, then the employer must notify the job applicant in writing of his or her specified rights.⁴²

Nonetheless, this new section does not apply in the following circumstances:

• To a position for which a state or local agency is otherwise required by law to conduct a conviction history background check;
• To a position with a criminal justice agency;
• To a position as a Farm Labor Contractor; or
• To a position where an employer or agent is required by any state, federal or local law to conduct criminal background checks for employment purposes or to restrict employment based upon criminal history.⁴³

Finally, this bill repealed Labor Code Section 432.9 which has been the current law prohibiting a state or local agency from asking an applicant for employment to disclose information concerning the conviction history of the applicant, until that agency has determined the applicant meets the minimum employment qualifications. This section of the law was in effect since July 1, 2014.

The goal of this new law is to help formerly incarcerated persons obtain employment, and the author and proponents have cited statistics that those with conviction records generally have lower rates of turnover and higher rates of promotion. This bill was initially opposed by the California business community, but eventually, they removed their opposition due to several requested amendments that the author made to his bill during the past Session.

As a result of this bill, job applications and means of recruiting must eliminate criminal conviction history during the pre-offer screening. Employees who recruit or interview job candidates need to be trained in the parameters of the new law. It will also be important to conduct criminal background checks post-offer, document the individualized assessment process, and ensure compliance with the response requirements when job offers are withdrawn.

AB 1701 – Liability for Subcontractors

AB 1701⁴⁴ (Thurmond – Richmond) was signed on October 14, 2017, to address labor wage liabilities owed by subcontractors. The bill added Section 218.7 to the Labor Code. By adding a new section to the state’s Labor Code, the provisions are enforceable under the California Private Attorneys General Act (PAGA).

The new law applies to contracts entered into on or after January 1, 2018. It specifies a direct contractor making or taking a contract in California for erecting, constructing, altering, or repairing a building, structure or other private work must assume, and is liable for, any debt owed to a wage claimant or third party on the claimant’s behalf that has been incurred by a subcontractor at any tier thereunder. It also applies to the direct contractor for the wage claimant’s performance of labor included in the contract.⁴⁵

The direct contractor’s liability extends only to any unpaid wage, fringe or other benefit payment or contribution, including interest owed. However, it does not extend to penalties or liquidated damages.⁴⁶

A direct contractor or any other person is prohibited from evading or committing any act that negates the requirements of this Labor Code section. However, the law does not prohibit a director contractor or a subcontractor from establishing by contract or enforcing other lawful remedies against a contractor if it hires for liability created by the nonpayment of wages or other benefits, or any contributions by any subcontractors.⁴⁷

Under this law, the Labor Commissioner may enforce against a direct contractor the liability for unpaid wages through an administrative process or through a civil action. In such cases, the direct contractor’s liability is limited to unpaid wages, including any interest owed.⁴⁸

In addition, a third party owed fringe or other benefits on a wage claimant’s behalf may bring a civil action against a direct contractor to enforce the liability created by the law. In such a case, the court must award a prevailing plaintiff its reasonable attorney’s fees and costs, which includes expert witness fees.⁴⁹

A joint labor-management cooperation committee established under federal law may also bring an action in any court of competent jurisdiction against a direct contractor or subcontractor for unpaid wages owed to a wage claimant by the direct contractor or subcontractor for the performance of private work, including unpaid wages owed. If this committee prevails, the court must award reasonable attorney’s fees and costs. However, prior to the commencement of an action, the committee must provide at least 30 days’ notice by first class mail.⁵⁰

No other party may bring an action against a direct contractor for unpaid wages.⁵¹ Property of the direct contractor may be attached after trial for the payment of any judgment received under this section.⁵²

Actions brought under this new code section must be filed within one year of the earliest of:

• Recordation of the notice of completion of the direct contract;
• Recordation of a notice of cessation of the work covered by the direct contract; or,
• Actual completion of the work covered by the direct contract.⁵³

Note that this section does not apply to work performed by an employee of the state, a special district, a city, a county, a city and county, or any political subdivision.⁵⁴

Upon request made by a direct contractor to a subcontractor, the subcontractor and any lower-tier subcontractors must provide payroll records which must contain the requirements specified in the Labor Code.⁵⁵ The payroll records must be for those employees who are providing labor on a private work and must contain the last four digits of the social security number of the employees. The payroll records must also show fringe or other benefit payments to a third party on the employee’s behalf.⁵⁶

In addition, upon request made by a direct contractor to a subcontractor, the subcontractor and any other lower tier subcontractors must provide the direct contractor award information that includes the project name, name and address of the subcontractor, anticipated work hours, and other specified information. ⁵⁷

A subcontractor’s failure to comply with these sections do not relieve the direct contractor from any of the obligations contained in this law.⁵⁸

The new law specifies that the obligations and remedies provided in this section are in addition to anything else provided by law, except that nothing in this law is to be construed to impose liability on a direct contractor for anything other than unpaid wages and fringe or other benefits.⁵⁹

In addition, nothing in this section alters the owner’s obligation to timely pay a direct contractor or a direct contractor’s obligation to timely pay a subcontractor, except that the direct contractor may withhold as “disputed” all sums owed if a subcontractor does not timely provide the information until that info is provided.⁶⁰

This new law represents a novel approach to the concept of “joint employment.” The Governor included a signing message with AB 1701:

I am signing Assembly Bill 1701. This bill would extend liability to a general contractor for wages owed to workers of a subcontractor and create new wage collection remedies for private non-public work projects.

The author and sponsors of this bill have committed to proposing legislation next year to resolve a dispute over the meaning of section 218.7 subdivision (h) in the Labor Code by striking that subdivision. I look forward to receiving that legislation early next year to avoid any ongoing disputes about the meaning of that provision when this measure takes effect on January 1, 2018.

Contractors in this state that are working on a private construction project will now be liable for wage and fringe benefit liabilities that are incurred by subcontractors at any tier of the project. While California law has generally provided joint liability, it applies to public works projects. This new law extends similar liability to private projects.

SB 63 – New Parental Leave

SB 63⁶¹ (Jackson – Santa Barbara) was signed on October 12, 2017 to create a new unlawful employment practice related to parental leave. Specifically, the bill creates a new leave mandate on businesses with 20 – 49 employees. An initial section of the bill names it the “New Parent Leave Act.”⁶²

The bill adds a new section to the Government Code⁶³ to create an unlawful employment practice for failure to provide a minimum of 12 weeks of parental leave or failure to maintain health plan coverage during the time of parental leave.⁶⁴ By amending the Fair Employment and Housing Act (FEHA), the bill allows considerable private enforcement of the new mandated leave policy, including the threat of injunctive relief, punitive damages, and attorney’s fees.

The new law prohibits an employer from refusing to allow an employee to take up to 12 weeks of parental leave to bond with a new child within one year of the child’s birth, adoption or foster care placement. An employee is defined to have more than 12 months of service with the employer and at least 1,250 hours of service with the employer during the previous 12 months, and who works for an employer with at least 20 employees located within 75 miles.⁶⁵

In addition, the new law prohibits an employer from refusing to maintain and pay for coverage for an eligible employee who takes parental leave under a group health plan for the duration of that leave, not exceeding 12 weeks over a 12-month period.⁶⁶

An employee can take other leave provided by existing state law if the employee is otherwise qualified for that leave.⁶⁷ However, this new leave mandate does not apply to an employee who is subject to both the leave provided to those employees who work for an employer with at least 50 employees and who are subject to the federal Family and Medical Leave Act.⁶⁸

An employer may recover the premium that the employer pays for maintaining coverage if the employee fails to return from leave after the period of leave has expired and the failure of the employee to return to work is for a reason other than the continuation, recurrence, or onset of a serious health condition or other circumstances beyond the employee’s control.⁶⁹

Where both parents are entitled to leave under this new mandate and they are both employed by the same employer, then the employer is not required to grant leave that would allow the parents leave totaling more than 12 weeks. In addition, the employer may grant simultaneous leave to both employees.⁷⁰

The new law also makes it an unlawful employment practice for an employer to refuse to hire a job applicant or to terminate or discriminate against an individual because the individual exercised his or her right to parental leave or because an individual gave information or testimony as to his or her parental leave (or even to another person’s leave) in an inquiry or proceeding.⁷¹

It is also an unlawful employment practice for an employer to interfere with, restrain or deny the exercise of any rights under this new code section.⁷² By making these violations an unlawful employment practice, they are subject to enforcement under FEHA.

The new law defines “employer” to mean a person who directly employs 20 or more persons to perform services for a wage, as well as the state, cities and counties.⁷³ The Fair Employment and Housing Council is directed to incorporate existing regulations interpreting the California Family Rights Act to govern the leave under this new code section.⁷⁴

Finally, the new law creates a 2-year mediation pilot program within the Department of Fair Employment and Housing, so long as necessary funding is appropriated by the Legislature. Under this temporary program, an employer may request mediation within 60 days of getting a right-to-sue notice. However, an employee can elect not to participate in or withdraw from the mediation.⁷⁵

Governor Brown vetoed a similar bill last year (SB 654) citing the cost burdens of a mandated parental leave program on small businesses. He also expressed a desire for mediation to address the litigation concerns expressed by the bill’s opponents. Interestingly, last year’s bill contained a 6-week mandated leave, whereas this year’s version contains a 12-week leave.

While the mediation program in this bill has a significant loophole, it was enough to satisfy the Governor’s concerns from last year’s bill. SB 63 was signed in a ceremony with the Legislative Women’s Caucus despite strong objections by the California business community. The California Chamber of Commerce had labeled SB 63 as a Job Killer bill.

SB 306 – Employee Retaliation Protections

SB 306⁷⁶ (Hertzberg – Van Nuys) was signed on October 3, 2017, which takes effect on January 1, 2018. This bill amended an existing Labor Code section and added three new code sections to address employee retaliation actions.

Existing law prohibits a person from being discharged, discriminated against, or retaliated against for having engaged in certain protected conduct. This law applies to existing employees as well as those applicants for employment. These individuals can file a complaint with the Division of Labor Standards Enforcement (DLSE), which is also known as the Labor Commissioner. When a complaint is filed, then the Labor Commissioner may investigate.

If successful, an employee or applicant for employment is entitled to reinstatement or employment and reimbursement for lost wages and work benefits. This bill makes several significant changes to the law that tilt the “scales of justice” in the favor of employees.

First, the DLSE is now authorized to commence an investigation of an employer with or without a complaint having been filed if the DLSE suspects retaliation or discrimination during its wage claim or other investigation (including field inspections and suspected immigration-related threats) that the Labor Commissioner is conducting.⁷⁷

Second, upon a finding of reasonable cause, the commissioner is authorized to petition a superior court for injunctive relief on a temporary or preliminary basis. This is a new standard, which is much lower than prior law and benefits employees. Under prior law, this could not occur until after an investigation was completed and a determination was made of the employer’s liability. And, prior law required a showing of irreparable harm and likelihood of success on the merits.

Under SB 306, a court would be required to order appropriate injunctive relief based on a belief that a violation has occurred. The court must do so if it determines that relief to be “just and proper.”⁷⁸

This same section of law now also requires the court to “consider the chilling effect on other employees asserting their rights under those laws in determining if temporary injunctive relief is just and proper.” In a minor benefit to the employer community, the bill provides that injunctive relief under this new provision would not prohibit an employer from disciplining or terminating an employee for conduct that is unrelated to the claim of retaliation.

Third, the Labor Commissioner is now authorized to issue citations directing specific relief to those determined to be responsible for violating the law. Under prior law, the Labor Commissioner pursued enforcement via a civil action.⁷⁹ The Labor Commissioner is also entitled to reasonable attorney’s fees if it is a prevailing party in an enforcement action.

In addition, there are review procedures, such as for requesting a hearing before a hearing officer for petitions for writ of mandate. Under prior law, employers could challenge a Labor Commissioner action in trial de novo court actions. Pursuant to SB 306, the employer challenge occurs with a writ of mandate and the posting of a bond.

Employers who willfully fail to comply with Labor Commissioner orders can be subject to civil penalties made payable to the employee. This penalty is $100 per day for each day of noncompliance by the employer, up to a maximum of $20,000.⁸⁰

Fourth, employees are authorized to seek injunctive relief from a court in addition to their civil action. If such injunctive relief is granted, it is not stayed pending appeal. These new powers are intended to protect employees from retaliatory conduct by employers. With a lower standard to obtain injunctive relief, the employer community will have to watch the actions of the Labor Commissioner to determine whether the new powers are used in appropriate instances.

This bill represents a major win for organized labor in this state. The California business community offered many amendments, but most of them were rejected. Their concern is that employees may be reinstated immediately, even if it takes 2-3 to investigate and make a final determination of a business’ liability.

SB 396 – Sexual Harassment Training

SB 396⁸¹ (Lara – Los Angeles) was signed on October 15, 2017 as to address employment issues regarding gender identity, gender expression, and sexual orientation. This bill amends sections of the Government Code and Unemployment Insurance Code.

This new law amended Section 12950 of the Government Code, which requires every employer to ensure a workplace free of sexual harassment by implementing certain minimum requirements. This bill added a new requirement for all employers to post a poster developed by the DFEH regarding transgender rights in a prominent and accessible location in the workplace.⁸²

This bill also amended Government Code Section 12950.1 by adding a new subdivision to require specified training. Now an employer must also provide training inclusive of harassment based on gender identity, gender expression and sexual orientation as a component of the training and education already required. The training must include practical examples and be presented by trainers with knowledge and expertise in these areas.⁸³

Under current law, employers with 50 or more employees must provide at least 2 hours of classroom or interactive training and education regarding sexual harassment of all supervisory employees in California. This training must occur at least once every two years and must include information and practical guidance regarding federal and state laws, along with practical examples presented by educated and knowledgeable trainers.

In addition, this bill amends Section 14005 of the Unemployment Insurance Code to add transgender and gender nonconforming individuals to the list of “individuals with employment barriers.” These individuals have a characteristic that substantially limits their ability to obtain employment due to specified factors.⁸⁴

Finally, this bill amended Section 14012 of the Unemployment Insurance Code to address an advisory board to the Governor to assist in the development of the State Plan and to carry out specified functions. Representatives of this advisory board may include community-based organizations, including those that serve transgender and gender nonconforming individuals pursuant to this change in the law.⁸⁵

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_{1. Chapter 688.}

_{2. Section 432.3(a).}

_{3. Section 432.3(b).}

_{4. Of course, this begs the question of what constitutes a “reasonable request”?}

_{5. Section 432.3(c).}

_{6. Section 432.3(e).}

_{7.  Section 432.3(f).}

_{8. Sections 432.3(g) and (h).}

_{9. Section 432.3(i).}

_{10. Chapter 492.}

_{11. Section 7285.1(a).}

_{12. Section 7285.1(b).}

_{13. Section 7285.1(c).}

_{14. Section 7285.1(d).}

_{15. Section 7285.1(e).}

_{16. Section 7285.2(a)(1).}

_{17. Section 7285.2(a)(2).}

_{18. Section 7285.2(b).}

_{19. Section 7285.2(c).}

_{20. Section 7285.1(d).}

_{21. Section 7285.3.}

_{22. Section 90.2(a)(1).}

_{23. Section 90.2(a)(2).}

_{24. Section 90.2(a)(3).}

_{25. Section 90.2(b)(1).}

_{26. Section 90.2(b)(2).}

_{27. Section 90.2(c).}

_{28. Section 90.2(d).}

_{29. Section 7285.1(e).}

_{30. Section 90.2(f).}

_{31. Section 1019.2(a).}

_{32. Sections 1019.2(b)(1).}

_{33. Section 1019.2(c).}

_{34. Chapter 789.}

_{35. Section One of the bill.}

_{36. Section 12952(a).}

_{37 Section 12952(c)(1)(A).}

_{38. Section 12952(c)(1)(A) and (B).}

_{39. Section 12952(c)(2).}

_{40. Section 12952(c)(3).}

_{41. Section 12952(c)(4).}

_{42. Section 12952(c)(5).}

_{43. Section 12952(d).}

_{44. Chapter 804.}

_{45. Section 218.7(a)(1).}

_{46. Section 218.7(a)(2).}

_{47. Section 218.7(a)(3).}

_{48. Section 218.7(b)(1).}

_{49. Section 218.7(b)(2).}

_{50. Section 218.7(b)(3).}

_{51. Section 218.7(b)(4).}

_{52. Section 218.7(c).}

_{53. Section 218.7(d).}

_{54. Section 218.7(e).}

_{55. Section 226.}

_{56. Section 218.7(f)(1).}

_{57. Section 218.7(f)(2).}

_{58. Section 218.7(f)(3).}

_{59. Section 218.7(h).}

_{60. Section 218.7(i).}

_{61. Chapter 686.}

_{62. Section One of the bill.}

_{63. Section 12945.6.}

_{64. Section Two of the bill.}

_{65. Section 12945.6(a)(1).}

_{66. Section 12945.6(a)(2).}

_{67. Section 12945.6(b).}

_{68. Section 12945.6(c).}

_{69. Section 12945.6(d)(1) and (2).}

_{70. Section 12945.6(e).}

_{71. Section 12945.6(g)(1) and (2).}

_{72. Section 12945.6(h).}

_{73. Section 12945.6(i)(1) and (2).}

_{74. Section 12945.6(j).}

_{75.Section 12945.6(k).}

_{76. Chapter 460.}

_{77. Section 98.7(a)(2).}

_{78. Section 98.7(b)(2).}

_{79. Section 98.7(c)(1).}

_{80. Section 98.7(c)(3).}

_{81. Chapter 858.}

_{82. Section 12950(a)(2).}

_{83. Section 12950.1(c).}

_{84. Section 14005(j)(14).}

 _{85. Section 14012(c)(2)(A).}

This article was written by Chris M. Micheli.

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