Tag: California

Legislature Tries Again To Put Citizens United On California Ballot

Nearly two years ago, I wrote that the California Supreme Court had blocked an effort to include an advisory vote in the statewide ballot. Proposition 49 asked whether the United States Congress and California Legislature should approve an amendment to the U.S. Constitution overturning the United States Supreme Court decision in Citizens United v. Federal Election Commission, 130 S. Ct. 876 (2010).  Just after New Year’s Day, the California Supreme Court issued an opinion addressing the merits of the argument.  The Court concluded:

  • As a matter of state law, the Legislature has authority to conduct investigations by reasonable means to inform the exercise of its other powers;

  • Among those other powers are the power to petition for national constitutional conventions, ratify federal constitutional amendments, and call on Congress and other states to exercise their own federal article V powers (U.S. Const., art. 5);

  • Although neither constitutional text nor judicial precedent provide definitive answers to the question, long-standing historical practice among the states demonstrates a common understanding that legislatures may formally consult with and  seek nonbinding input from their constituents on matters relevant to the federal constitutional amendment process;

  • Nothing in the state Constitution prohibits the use of advisory questions to inform the Legislature’s exercise of its article V-related powers; and

  •  Applying deferential review, Proposition 49 is reasonably related to the exercise of those powers and thus constitutional.

Howard Jarvis Taxpayers Assn. v. Padilla, 62 Cal. 4th 486, 494 (2016).

Earlier this month, Senators Benjamin Allen and Mark Leno decided to take another run at putting an advisory vote on the ballot. They gutted SB 254, a bill amending the Streets and Highways Code, and inserted legislation calling a special statewide election to be consolidated with the November 8, 2016 general election.  At this special election, the voters will be asked to vote on the following “advisory” question:

Shall the Congress of the United States propose, and the California Legislature ratify, an amendment or amendments to the United States Constitution to overturn Citizens United v. Federal Election Commission (2010) 558 U.S. 310, and other applicable judicial precedents, to allow the full regulation or limitation of campaign contributions and spending, to ensure that all citizens, regardless of wealth, may express their views to one another, and to make clear that the rights protected by the United States Constitution are the rights of natural persons only?

When Governor Brown allowed Proposition 49 (SB 1272) to become law without his signature, he observed “we should not make it a habit to clutter our ballots with nonbinding measures as citizens rightfully assume that their votes are meant to have legal effect.”  (Letter to Members of Cal. State Senate, July 15, 2014.). Perhaps the same could be said of proxy statements.

Article By Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP
© 2010-2016 Allen Matkins Leck Gamble Mallory & Natsis LLP

What Does the US Supreme Court Ruling Mean for Local Affordable Housing Laws?

On February 29, the US Supreme Court denied certiorari in California Building Industry Association v. City of San Jose, 61 Cal. 4th 435 (2015), and leaves standing a unanimous decision by the California Supreme Court upholding the city of San Jose’s affordable housing ordinance.

San Jose’s ordinance compels all developers of new residential development projects with 20 or more units to reserve a minimum of 15 percent of for-sale units for low-income buyers, and the price of those units cannot exceed 30 percent of the buyers’ median income. The ordinance requires these restrictions to remain in place for 45 years. Alternatively, the developer can pay the city a fee in lieu. The California Building Industry Association argued that the ordinance was an unlawful exaction in violation of Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Management District, 133 S. Ct. 2586 (2013). In a June 15, 2015 decision, the California Supreme Court disagreed, concluding that the ordinance is not an exaction because it does not require a developer to give up a property interest, but instead a typical zoning restriction subject to rational basis review.

In concurring with the US Supreme Court’s denial of certiorari in this case, Associate Justice Clarence Thomas acknowledged the important issues raised in California Building Industry Association, perhaps signaling the Court may revisit this issue. In particular, Justice Thomas stated, “For at least two decades . . . lower courts have divided over whether the Nollan/Dolan test applies in cases where the alleged taking arises from a legislatively imposed condition rather than an administrative one. . . . I continue to doubt that ‘the existence of a taking should turn on the type of governmental entity responsible for the taking. . . . Until we decide this issue, property owners and local governments are left uncertain about what legal standard governs legislative ordinances and whether cities can legislatively impose exactions that would not pass muster if done administratively.”

Ultimately, however, Justice Thomas determined that California Building Industry Association did not provide an opportunity to decide the conflict: “The City raises threshold questions about the timeliness of the petition for certiorari that might preclude us from reaching the Takings Clause question. Moreover, petitioner disclaimed any reliance on Nollan and Dolan in the proceedings below. Nor did the California Supreme Court’s decision rest on the distinction (if any) between takings effectuated through administrative versus legislative action.”

The denial of certiorari leaves in place similar “inclusionary” affordable housing programs that have been adopted in more than 170 California municipalities.

Article By Bryan K. Brown, Cynthia L. Burch, David P. Cohen & Kenneth G. Lore

©2016 Katten Muchin Rosenman LLP

California DFEH Announces Guidance to Employers Regarding Transgender Rights in the Workplace

Individuals who identify as transgender are protected under California’s Fair Employment & Housing Act (Cal. Govt. Code §12940)(“FEHA”).  FEHA protection was extended in 2012 to include gender identity and gender expression categories, and defines “gender expression” to mean a “person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”  Transgender worker rights have received increased attention in recent months as employers attempt to put into place compliant procedures that are sensitive to transgender workers.

On February 17, 2016, the California Department of Fair Employment and Housing (“DFEH”) issued guidelines on transgender rights in the workplace.  As this cutting edge area of law continues to develop, employers would be wise to follow the DFEH common sense recommendations which are summarized below:

Do Not Ask Discriminatory Questions

Finding the right employee can be a challenge for employers.   Interviews of prospective candidates can provide helpful insight as to whether the particular candidate is right for the position.  Employers may ask about an employee’s employment history, and may still ask for personal references and other non-discriminatory questions of prospective employees.  However, an employer should not ask questions designed to detect a person’s sexual orientation or gender identity.  The following questions have been identified by the DFEH as off-limits:

  • Do not ask about marital status, spouse’s name or relation of household members to one another; and

  • Do not ask questions about a person’s body or whether they plan to have surgery because the information is generally prohibited by the Health Insurance Portability and Accountability Act (HIPAA).

Apply Dress Codes and Grooming Standards Equally

The DFEH reminds employers that California law explicitly prohibits an employer from denying an employee the right to dress in a manner suitable for that employee’s gender identity.  Any employer who requires a dress code must enforce it in a non-discriminatory manner.  For example, a transgender man must be allowed to dress in the same manner as a non-transgender man.  Additionally, transgender persons should be treated equally as are non-transgender persons.

Employee Locker Rooms/Restrooms

According to the DFEH, employees in California have the right to use a restroom or locker room that corresponds to the employee’s gender identity, regardless of the employee’s assigned sex at birth.  Where possible, employers should provide an easily accessible unisex single stall bathroom for use by any employee who desires increased privacy.  This can be used by a transgender employee or a non-transgender employee who does not want to share a restroom or locker room with a transgender co-worker.

Summary

It is important to note that FEHA protects transgender employees and those employees who may not be transgender, but may not comport with traditional or stereotypical gender roles.

The DFEH’s guidance reminds California employers that a transgender person does not need to have sex reassignment surgery, or complete any particular step in a gender transition to be protected by the law.  An employer may not condition its treatment or accommodation of a transitioning employee on completion of a particular step in the transition.

Ultimately, while not the binding authority, the DFEH’s message is clear—employers should avoid discriminatory conduct, apply procedures consistently, and follow transgender employee’s lead with respect to their gender identity and expression.  The DFEH guidelines are consistent with the Equal Employment Opportunity Commission’s interpretation that Title VII prohibits discrimination based on sexual orientation and gender identity.

Article By Anne Cherry Barnett of Polsinelli PC

© Polsinelli PC, Polsinelli LLP in California

California Political Contribution Case That 19 Law Professors Missed

Earlier this week, I wrote about an amicus curiae brief submitted by 19 law school professors Friedrichs v. Cal. Teachers Ass’n, a case now pending before the United States Supreme Court.  In particular, I questioned whether these academics properly described the holding Finley v. Superior Court, 80 Cal. App. 4th 1152 (2000).  The professors claimed that the case represented a “rare example” of a court holding that the business judgment rule is a defense to an attack on a corporate contribution.  In fact, the reported holding in the case was that the business judgment rule was a defense to the decision of a special litigation committee.

The 19 law professors also incorrectly described the holding in another California case, Barnes v. State Farm Mut. Auto. Ins. Co., 16 Cal. App. 4th 365 (1993) (“claim by policyholder of mutual insurance company seeking to stop insurer from engaging in political activities dismissed because the decision was protected by the business judgment rule . . .”).  Although the Court of Appeal did invoke the business judgment rule in Barnes, it did so in the context of the policyholder’s separate claim that the company was maintaining too large a surplus.  The policyholder’s challenge to political expenditures was made on constitutional grounds and the Court of Appeal’s analysis of that claim did not involve the business judgment rule.

Even though the law professors erroneously cited Finley and Barnes, I do believe that courts should, and do, apply the business judgment rule to director decisions to make political and other contributions.  In fact, the professors overlooked one California case in which the court expressly deferred to the business judgment of the directors. Marsili v. Pacific Gas & Elec. Co., 51 Cal. App. 3d 313 (1975) was a derivative suit challenging the propriety of a political contribution.  Here’s what the Court of Appeal had to say:

Neither the court nor minority shareholders can substitute their judgment for that of the corporation “where its board has acted in good faith and used its best business judgment in behalf of the corporation.”

Quoting Olson v. Basin Oil Co., (1955) 136 Cal.App.2d 543, 559-560 (1955).

Article By Keith Paul Bishop of Allen Matkins Leck Gamble Mallory & Natsis LLP

© 2010-2015 Allen Matkins Leck Gamble Mallory & Natsis LLP

Email Notice Without Consent Is Not Notice

Allen Matkins Law Firm

The California General Corporation Law unequivocally authorizes the giving of notice of stockholder meetings by electronic transmission.  Section 601(b) provides “Notice of a shareholders’ meeting or any report shall be given personally, by electronic transmission by the corporation . . .”.  The statute further provides that notice is deemed to have been given when sent by electronic transmission by the corporation.  Nonetheless, sending notice by email may not be valid because the statute provides that notice by electronic transmission is valid only if it complies with Section 20 of the Corporations Code.

Section 20 imposes two general conditions and one specific condition to the giving of notice by electronic transmission.  First, the recipient must have provided an unrevoked consent to the use of those means of transmission for communications under or pursuant to the Corporations Code.  Since the term “electronic transmission by the corporation” includes several different means of transmission, the consent must be to the form of transmission (e.g., facsimile or email).  Second, the electronic transmission must create “a record that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form”.  Finally, if the recipient is an individual shareholder who is a natural person, the consent to the transmission must be preceded by, or include, a clear written statement to the recipient as to:

  • any right of the recipient to have the record provided or made available on paper or in non-electronic form,

  • whether the consent applies only to that transmission, to specified categories of communications, or to all communications from the corporation, and

  • the procedures the recipient must use to withdraw consent.

Nearly two decades ago, I wrote about the Corporations Code move into Cyberspace, The California Corporations Code Enters Cyberspace: 1995 Legislation Tackles New On-Line Technologies, 18 CEB California Business Law Reporter 5 (1996).

More On The SEC’s Backwards Rule Proposal

In this February post, I argued that the SEC got it backwards when it proposed new rules requiring disclosure of whether hedging transactions by directors, officers and others are permitted.  My point was that directors and officers don’t need the company’s permission to engage in these transactions.  The relevant disclosure is whether the company prohibits hedging transactions that would otherwise be permitted.  The SEC’s proposed rules misleadingly imply that permission is required.

Recently, I was reading an account of the interactions between the first American consul to Japan, Townsend Harris, and Governor Okada of Shimoda, Japan.  The Japanese government was concerned that the Americans would survey the coast of Japan and pressed Harris to prohibit any surveying by American vessels.  The following record illustrates how the want of permission might be argued into a prohibition:

The Japanese: There is not article in the treaty which prohibits surveying.

Harris: There is no article which prohibits it.

Moriyama [a member of the Governor’s staff]:  Not to permit it means that we refuse it.

Dai Nihon Komonjo, Bakumatsu Gaikoku Kankei Monjo, XV, 63.

If this seems a bit of obscure history, John Wayne actually played Townsend Harris in the 1958 film, The Barbarian and the Geisha, directed by John Huston.

By Keith Paul Bishop

Of Allen Matkins Leck Gamble Mallory & Natsis LLP

Anti-Bullying Laws in California and Tennessee Could Be the Start of a New Trend

Jackson Lewis Law firm

While there are no current federal laws that prevent workplace bullying in the private sector, “Healthy Workplace” bills have been introduced in 26 states since 2003.  Tennessee recently became the first state to pass the “Healthy Workplace Act,” a law designed to encourage public sector agencies to create an anti-bullying policy that addresses “abusive conduct” by making the agencies immune to bullying-related lawsuits if they adopt a policy that complies with the law.

More recently, California passed a workplace anti-bullying law for private-sector employers that became effective on January 1, 2015.  California’s A.B. 2053 requires employers with 50 or more employees that already provide training on preventing sexual harassment to include new training on preventing “abusive conduct” in the workplace to supervisory employees.  It is likely that other states will follow suit and pass their own “Healthy Workplace” bills in the coming years as anti-bullying continues to trend in the news and become a focus in the workplace.

Statistics show bullying in the workplace may be a real problem, with 65.6 million U.S. workers being affected by it.  According to 2014 National Survey conducted by the Workplace Bullying Institute, 27 percent of U.S. workers reported that they had experienced abusive conduct at work and 21% of U.S. Workers have witnessed abusive conduct of others at work.

The 2014 National Survey uncovered that most employees do not think that their employers do enough to address workplace bullying:

• 25% of employees’ surveyed asserted that employers deny that bullying and harassing conduct takes place and fail to investigate complaints

• 16% asserted that employers discount bullying or describe it as non-serious

•  15% asserted that employers rationalize it by describing the bullying as innocent

• 11% asserted that employers defend abusive conduct when the perpetrators are executives and managers

Only 12% of employees’ surveyed found that their employers took steps to eliminate bullying by creating and enforcing certain policies and procedures.  The perceived failure from employees and state lawmakers that employers are adequately addressing workplace bullying may be one reason for the recent passage of anti-bullying laws in Tennessee and California and the introduction of similar bills in other states.

Under Tennessee’s Healthy Workplace Act, “abusive conduct” is broadly defined as acts or omissions that would cause a reasonable person, based on the severity, nature, and frequency of the conduct, to believe that an employee was subject to an abusive work environment, such as: (A) Repeated verbal abuse in the workplace, including derogatory remarks, insults, and epithets; (B) Verbal, non-verbal, or physical conduct of a threatening, intimidating, or humiliating nature in the workplace; or (C) The sabotage or undermining of an employee’s work performance in the workplace.

California’s A.B. 2053 similarly defines “abusive conduct” very broadly.  “Abusive conduct” means conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests.  It may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.  The Act recognizes that a single act shall not constitute abusive conduct, unless especially severe and egregious.

While California and most other states do not provide a private right of action for an employee to sue for workplace bullying, bullying at the workplace – that goes unchecked – can result in negative consequences, such as decreased productivity and efficiency, increased absenteeism, loss of morale, increased resignations or transfer requests, and increased hotline calls and internal complaints.   It may also result in employees suing their employers for harassment or a hostile work environment based on a protected class, such as race and gender under Title VII of the Civil Rights Act of 1964 or for tort liability claims, such as negligent hiring or intentional infliction of emotional distress.

Thus, employers would be well-advised to manage this risk and develop a stronger workplace conduct policy now.  To address the potential for workplace bullying and the possibility that states will follow Tennessee’s and California’s lead in regulating workplace bullying, employers should analyze the workplace culture for incidents or prevalence to bullying and develop a workplace bullying prevention program.

ARTICLE BY

Nickole C. Winnett
OF
Jackson Lewis P.C.

California Labor Laws for the New Year

Drinker Biddle Law Firm

If only the Beatles’ call to “Let it Be” was heard by the California Legislature. Instead, employer regulation is on the rise again. In 2014, 574 bills introduced mentioned “employer,” compared to 186 in 2013. Most of those 500-plus bills did not pass, and several that did pass were not signed into law by the governor. One veto blocked a bill that would have penalized employers for limiting job prospects of, or discriminating against, job applicants who aren’t currently employed.

A sampling of significant new laws affecting private employers, effective Jan. 1, 2015, unless otherwise mentioned, follows.

Shared Liability for Employers Who Use Labor Contractors

AB 1897 mandates that companies provided with workers from a labor contractor to perform labor within its “usual course of business” at its premises or worksite will “share with the labor contractor all civil legal responsibility and civil liability” for the labor contractor’s failure to pay wages required by law or secure valid workers compensation insurance, for the workers supplied.

The law applies regardless of whether the company knew about the violations and whether the company hiring the labor contractor (recast by the new law as a “client employer”) and labor contractor are deemed joint employers. This liability sharing is in addition to any other theories of liability or requirements established by statutes or common law.

The client employer will not, however, share liability under this new law if it has a workforce of less than 25 employees (including those obtained through the labor contractor), or is supplied by the labor contractor with five or fewer workers at any given time.

A labor contractor is defined as an individual or entity that supplies, either with or without a contract, a client employer with workers to perform labor within the client employer’s usual course of business, unless the specific labor falls under the exclusion clause in AB 1897. Excluded are bona fide nonprofits, bona fide labor organizations, apprenticeship programs, hiring halls operated pursuant to a collective bargaining agreement, motion picture payroll services companies and certain employee leasing arrangements that contractually obligate the client employer to assume all civil legal responsibility and civil liability for securing workers’ compensation insurance.

This bill is a significant expansion of existing law—which is limited to prohibiting employers from entering into a contract for labor or services with a construction, farm labor, garment, janitorial, security guard or warehouse contractor—if the employer knows or should know that the agreement does not include sufficient funds.

In light of the new law, labor services contractor engagements should be evaluated with an eye toward limiting the risk of retaining non-compliant contractors, including indemnity, insurance, termination provisions and compliance verification protocols.

Wage and Hour Changes

California’s $9 hourly minimum wage is due to increase to $10 Jan. 1, 2016. Defeated by the California Legislature, however, was a bill to raise the hourly minimum wage to $11 in 2015, $12 in 2016, $13 in 2017 and then adjust annually for inflation starting in 2018.

Undeterred, several municipalities have increased their respective minimum wage for companies who employ workers in their jurisdiction. For example, employees who work in San Francisco more than two hours per week, including part-time and temporary workers, are entitled to the San Francisco hourly minimum wage, which increased Jan. 1 from $10.74 to $11.05 and will increase to $12.25 by May 1. Hourly minimum wages also increased Jan. 1 in San Jose ($10.30).

The minimum wage will increase in Oakland March 2 ($12.25) and in Berkeley Oct. 1 ($11). Many other cities have either enacted, or have pending, minimum wage laws.

Federal minimum wage continues to lag behind California, but no longer for federal contractors. President Obama issued Executive Order 13658 in 2014 which established that workers under federal contracts must be paid at least $10.10 per hour. This applies to new contracts and replacements for expiring federal contracts that resulted from solicitations issued on or after Jan. 1, 2015, or to contracts that were awarded outside the solicitation process on or after Jan. 1, 2015. There are prevailing wage requirements for many state and local government and agency contractors as well.

Employers should monitor each of the requirements, including those in the jurisdiction in which they do business, to assure compliance.

Paid Sick Days Now Required

Effective July 1, AB 1522 is the first statewide law that requires employers to provide paid sick days to employees. The new law grants employees, who worked at least 30 days since the commencement of their employment, the right to accrue one hour of paid sick time off for each 30 hours worked—up to 24 hours (three days) in a year of employment. Exempt employees are presumed to work a 40-hour normal workweek; but, if their normal workweek is less, the lower amount could be used for accrual purposes.

An employer may cap accrual at 48 hours (six days) and also may limit the use of paid sick days in a year to 24 hours. Unused paid sick days normally carry-over from year to year, though no carry-over is required if 24 hours of paid sick days is accrued to the employee at the beginning of a year. No payout is required at termination of employment.

The paid sick days may be used for the employee’s own health condition or preventative care; a family member’s health condition or preventative care; if the employee is a victim of domestic assault or sexual violence; and stalking. “Family member” means a child, regardless of age or dependency (including adopted, foster, step or legal ward), parent (biological, adoptive, foster, step, in-law or registered domestic partner’s parent), spouse, registered domestic partner, grandparent, grandchild or siblings.

The law applies to all employers, regardless of size, except for a few categories of employees that are not covered—such as those governed by a collective bargaining agreement that contains certain provisions, in-home supportive services providers and certain air carrier personnel.

Employers must keep records for at least three years, a new workplace poster is required and employers are barred from retaliating against employees who assert rights under this new law.

Failure of an employer to comply with AB 1522 can result in significant monetary fines and penalties in addition to pay for the sick days withheld, reinstatement and back pay if employment was ended, and attorneys fees and costs.

Employers should beware to integrate city specific paid sick leave laws with the new state law. For example, the pre-existing San Francisco paid sick day law has some provisions that are similar and some that are different from AB 1522. As a general rule, where multiple laws afford employee rights on a common topic, the employee is entitled to the law benefits that favors the employee most.

Discrimination Law and Training Requirements Expanded

AB 1443 amends the California Fair Employment and Housing Act (FEHA) to make its anti-discrimination, anti-harassment and religious accommodation provisions apply to unpaid interns. It also amends FEHA’s anti-harassment, and religious belief or observance accommodation provisions, to apply to volunteers. This new law appears to respond to, and trump, courts that have not classified these workers as employees and, in turn, found them not eligible for legal protections afforded to employees.

Prior law requires the California Department of Motor Vehicles to commence issuing special drivers licenses in January to applicants who meet other requirements to obtain a license, but cannot submit satisfactory proof of lawful presence in the United States. AB 1660 amends FEHA to prohibit discrimination against holders of these special drivers licenses; adverse action by an employer because an employee or applicant holds a special license can be a form of national origin discrimination. Employer compliance with any requirement or prohibition of federal immigration law is not a violation of FEHA.

Since 2006, employers of 50 or more employees have been required to provide supervisors with two hours of classroom or other effective interactive anti-sexual harassment training, every two years. New supervisors are to receive the training within six months after they start a supervisory position. This is commonly known as “AB 1825” training.

In apparent response to societal concerns about the impacts of bullying in general, AB 2053 requires that AB 1825 training include a component on abusive conduct prevention. Under the new law, abusive conduct means “conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive and unrelated to an employer’s legitimate business interests.

Abusive conduct may include repeated infliction of verbal abuse—such as the use of derogatory remarks, insults and epithets; verbal or physical conduct that a reasonable person would find threatening, intimidating or humiliating; or the gratuitous sabotage or undermining of a person’s work performance. A single act shall not constitute abusive conduct, unless especially severe and egregious.”

The new law does not make abusive conduct unlawful in and of itself, but it’s common for plaintiffs’ counsel to try, in attempts to win cases, to tether abusive behavior by a supervisor to conduct that is alleged to be unlawful.

SB 1087 requires farm labor contractors to provide sexual harassment prevention and complaint process training annually to supervisory employees and at the time of hire and each two years thereafter to non-supervisory employees. The new law also blocks state licensing of farm labor contractors who have been found by a court or administrative agency to have engaged in sexual harassment in the past three years, or who knew— or should have known—that a supervisor had been found by a court or administrative agency to have engaged in sexual harassment in the past three years.

Child Labor Laws Enhanced

AB 2288, the Child Labor Protection Act of 2014, accomplishes three things.

1. It confirms existing law that “tolls” or suspends the running of statutes of limitation on a minor’s claims for unlawful employment practices until the minor reaches the age of 18.

2. Treble damages are now available—in addition to other remedies—to an individual who is discharged, threatened with discharge, demoted, suspended, retaliated or discriminated against, or subjected to adverse action in the terms or conditions employment because the individual filed a claim or civil action alleging a violation of the Labor Code that arose while the individual was a minor.

3. For Class “A” child labor law violations involving minors at or under the age of 12, the required range of civil penalties increases to $25,000 to $50,000. Class A violations include employing certain minors in dangerous or prohibited occupations under the Labor Code, acting unlawfully or under conditions that present an imminent danger to the minor employee, and three or more violations of child work permit or hours requirements.

Immigration and Retaliation

Several new California laws involving immigration issues surfaced last year. All were premised on existing law that all workers are entitled to the rights and protections of state employment law regardless of immigration status, and that employers must not leverage immigration status against applicants, employees or their families.

This year, AB 2751 adds to and clarifies these existing laws.

For example, actionable “unfair immigration- related practices” now include threatening or filing a false report to any government agency. The bill also clarifies that a court has authority to order the suspension of business licenses of an offending employer to block otherwise lawful operations at worksites where the offenses occurred.

What’s Next?

Employers should consider how these new laws impact their workplaces, and then review and update their personnel practices and policies with the advice of experienced attorneys or human resource professionals.

*Originally published by CalCPA in the January/February 2015 issue of California CPA.

ARTICLE BY

Mark E. Terman
Drinker Biddle & Reath LLP

New State Privacy Laws Go Into Effect on Jan. 1, 2015 (California and Delaware)

State legislators have recently passed a number of bills that impose new data security and privacy requirements on companies nationwide. The laws include new data breach notification requirements, marketing restrictions, and data destruction rules. Below is an overview of the new laws and amendments that will go into effect on January 1, 2015.

Amendments to California’s Data Security and Breach Notification Law

In October 2014, California Governor Jerry Brown signed into law California bill AB 1710, an amendment to California’s existing data security and breach notification law. As a result, the following changes to California’s law will go into effect on Jan. 1:

1. Companies that maintain personal information about Californians will need to implement and maintain reasonable security procedures and practices.

California’s current data security and breach law requires companies that own or license personal information about Californians to “implement and maintain reasonable security procedures and practices appropriate to the nature of the information.”  For purposes of this data security requirement, California defines “personal information” as an individual’s first name (or first initial) and her last name in combination with her social security number, driver’s license or California ID number, any medical information, or a financial account number (such as a credit or debit card number) and the associated access code.

Under existing law, the terms “own” and “license” include personal information retained as a part of a business’s internal customer accounts or for the purpose of using the information in transactions.

As of Jan. 1, California law will require companies that merely “maintain” personal information about Californians (such as cloud providers), but do not own or license the information, also implement and maintain reasonable security procedures and practices appropriate to the nature of the information.

2. Companies that maintain personal information about Californians will be required to immediately notify the owner or licensee of the personal information in the event of a breach.

California currently requires companies that own or license personal information to disclose a data breach where it is reasonably believed that unencrypted personal information about a Californian was acquired without authorization. Current law also provides that such disclosure be made “in the most expedient time possible and without unreasonable delay.”

As of Jan. 1, companies that maintain personal information will be required to notify the owner or licensee of the personal information “immediately” after discovery of a breach if the personal information was, or is reasonably believed to have been, acquired by an unauthorized person.

For purposes of data breach disclosure, “personal information” includes login credentials (“[a] user name or email address, in combination with a password or security question and answer that would permit access to an online account,”) as well as an individual’s first name (or first initial) and her last name in combination with her social security number, driver’s license or California ID number, any medical information, or a financial account number (such as a credit or debit card number) and the associated access code.

As a reminder, other than for user name and password breaches (discussed below), current California law requires that a breach notification must be written in plain language and must include specific types of information about the breach.

Where the security breach involves the breach of online account information and no other personal information, then California law requires a business to provide the security breach notification in electronic or other form, directing the person whose personal information has been breached to promptly change her password and security question or answer, as applicable, or to take other steps appropriate to protect the online account with that business as well as all other online accounts for which the person uses the same name or email address and password or security question or answer.

However, where the security breach involves the breach of login credentials of an email account provided by a business, the business must not send the security breach notification to that email address. Instead, the business may comply with California law by providing notice by hard copy written notice or by clear and conspicuous notice delivered to the individual online when the individual is connected to the online account from an IP address or online location from which the business knows the resident customarily accesses the account.

3. After a breach, companies might be required to provide free identity theft prevention and mitigation services for 12 months.

AB 1710’s co-author stated in a press release that the bill “[r]equires the source of the breach to offer identity theft prevention and mitigation services for 12 months at no cost to individuals affected by a data breach. However, it is not clear whether this position is supported by the text of the bill, which only states that “if any” identity theft prevention and mitigation services are to be provided, then such services must be provided for 12 months at no cost.  An earlier version of the bill had stated that identity theft and mitigation services “shall beprovided” to individuals affected by a data breach.

Given the ambiguity of the requirement to provide free identity theft prevention and mitigation services, whether and how this provision will be enforced in 2015 is something to watch.

4. Companies may not sell, advertise for sale, or offer to sell an individual’s social security number.

The amendment also includes a new prohibition on social security numbers. As of Jan. 1, California law will prohibit the sale, the advertisement for sale, and the offer to sell an individual’s social security number. Businesses that own, license, or maintain information on an individual’s social security number will want to keep this new prohibition in mind when contemplating data transfer or broker agreements, or other transactions involving the personal information of Californians.

California’s New Minor Privacy Marketing and Privacy Law

California’s “Privacy Rights for California Minors in the Digital World Law”, SB 568, (1) bars some online operators from marketing certain products and services to minors, and (2) allows minors under 18 to request deletion of certain content from websites on which they have registered (known informally as the “eraser law.”)

1. Restrictions on Marketing to Minors

Operators of websites, online services, online applications, and mobile applications that are directed to minors are prohibited from marketing or advertising the following products and services:

  • Alcoholic beverages

  • Tobacco, cigarette, or cigarette papers, or blunt wraps, or any other preparation of tobacco, or any other instrument or paraphernalia that is designed for the smoking or ingestion of tobacco, products prepared from tobacco, or any controlled substance

  • Electronic cigarettes

  • Salvia divinorum or Salvinorin A, or any substance or material containing Salvia divinorum or Salvinorin A

  • Drug paraphernalia

  • Firearms or handguns, ammunition or reloaded ammunition, handgun safety certificates, BB device

  • Less lethal weapons

  • Dangerous fireworks

  • Aerosol containers of paint capable of defacing property

  • Etching cream capable of defacing property

  • Tanning in an ultraviolet tanning device

  • Dietary supplement products containing ephedrine group alkaloids

  • Tickets or shares in a lottery game

  • Body branding or permanent tattoos

  • Obscene matter

These operators also are prohibited from: (1) knowingly using, disclosing, or compiling a minor’s personal information for the purposes of marketing or advertising any of those prohibited products or services, and (2) knowingly allowing a third party to use, disclose, or compile the minor’s personal information to market or advertise these products or services.

If an operator has actual knowledge that a minor is using the services, the operator may not target marketing or advertising to that minor based on the minor’s personal information.  The operator also may not use, disclose, or compile the minor’s personal information to market or advertise the prohibited products or services, nor may the operator allow a third party to use, disclose, or compile the minor’s personal information for the prohibited products and services.

2. Deletion Requirement

If a minor is a registered user of a website, online service, online application, or mobile application, the operator must allow the minor to remove content and information that the minor had publicly posted on the website, service, or app.  Operators also are required to provide notice of this right to registered minors.

Operators are not required to delete content or information if:

  • Any federal or state law requires the operator to maintain the content or information;

  • The content or information was provided by an individual other than the minor;

  • The content or information is anonymized;

  • The minor did not properly follow the instructions for requesting deletion; or

  • The minor received compensation or consideration for providing the content.

Amendments to California’s Invasion of Privacy Law

California’s Invasion of Privacy law will also receive an update on January 1, 2015. The California Invasion of Privacy law currently prohibits the attempt to capture, in a manner that is offensive to a reasonable person, any type of visual image, sound recording, or other physical impression, when the person is engaged in a personal or familial activity under circumstances where they had a reasonable expectation of privacy. Current California law prohibits the activities described where the attempt to capture is done through a visual or auditory enhancing device. As of January 1, 2015, the above activities will be prohibited when done using any device.

New Delaware Data Destruction Law

Companies conducting business in Delaware will be required to take all reasonable steps to destroy or arrange for the destruction of a consumer’s personal identifying information when those records are no longer retained. Destruction may occur by shredding, erasing, or otherwise destroying or modifying the personal identifying information so as to render the information unreadable or indecipherable.

The Delaware law defines personal identifying information as a consumer’s first name or first initial and last name in combination with one of the following: signature; date of birth; social security number; passport number; driver’s license or state identification card number; insurance policy number; financial services account number, bank account number, credit card number, or other financial information; or confidential health care information.

Entities subject to the Gramm-Leach-Bliley Act, covered entities subject to HIPAA, and consumer reporting agencies subject to the FCRA are exempt from the new law. Other entities, however, may be subject to private enforcement actions, which allow for the recovery of treble damages. These have the potential to add up quickly, as each record unreasonably disposed of constitutes a violation under the statute. In addition, the Delaware Attorney General and Division of Consumer Protection of the Department of Justice may bring suit in certain circumstances.

ARTICLE BY

David N. Fagan
Kurt Wimmer
Jeff Kosseff
Katherine R. H. Gasztonyi
OF
Covington & Burling LLP

Uber Argues That Its Drivers Are Not Employees

In a case pending in California federal court, Uber is arguing that its drivers are not employees. O’Connor et al. v. Uber Technologies, Inc. et al., No. 3:13-cv-03826 (N.D. Cal. filed Aug. 16, 2013). Uber drivers have sued the company in a putative class action that alleges that they were short-changed because they received only a portion of the 20 percent gratuity paid by passengers.

In response, Uber recently filed a motion for summary judgment that argued that its drivers are not employees because they do not provide services to Uber. Rather, Uber provides a service to its drivers, because drivers pay for access to “leads,” or potential passengers, through the Uber application, and therefore, like passengers, drivers are customers who receive a service from the company. Uber also argued that even if drivers are deemed to provide services to Uber, they do so as independent contractors, not employees. This is because, Uber contends, the company provides drivers with a lead generation service but does not control the manner or means of how they work, and therefore, Uber is in a commercial rather than an employment relationship with its drivers.

This is not the first and likely not the last of Uber’s legal troubles in California. Passengers have also filed a proposed class action over the 20 percent gratuity, and last week, San Francisco and Los Angeles District Attorneys have hit Uber with a consumer safety suit over how it screens its drivers. There will surely be more to come as we watch what happens with Uber in California.

ARTICLE BY

Rachel T. Segal
OF
Barnes & Thornburg LLP

Data Breach Developments in California (Part 2)

Morgan Lewis

Last week, we discussed three important changes to California’s data breach law that become effective January 1, 2015. Part two of this series looks at the data breach report recently released by the California Attorney General.

California Data Breach Report

In October, the California Attorney General’s data breach report presented key findings on breaches occurring in California and recommendations for lawmakers and affected industries. Notable findings and recommendations from the report are summarized below.

  • Data breaches are on the rise. Among other findings, the report found that the number of data breaches in California increased by 28% from 2012 to 2013, with “intentional unauthorized intrusions into computer systems” showing the biggest increase among breach categories and accounting for 53% of reported incidents.

  • Breaches of payment card data in the retail industry are most likely to result in fraud. The report found that from 2012 to 2013, the retail industry experienced 77 breaches, or 26% of all breaches, representing the largest share among industry sectors. Almost all (90%) of these breaches involved payment card data, which, according to the report, is the most likely data breach category to result in fraud.

  • Offers of mitigation services are on the rise and can be helpful to affected individuals. The report notes that after experiencing a data breach, entities are commonly offering mitigation services, such as free credit monitoring or other identity theft protection services, which can be helpful by providing advanced notice to individuals whose information is used fraudulently. However, the report found that no offers were made in 28% of incidents where the services would have been helpful. As discussed in part one, the new California law requires breach notices to include offers of mitigation services in certain circumstances.

  • Retailers should take action to “devalue payment card data.” Based on the finding that retail breaches involving payment card data are most likely to result in fraud, the report recommends that retailers take advantage of “promising” new technology, such as chip cards and tokenization, to enhance their security measures and “devalue payment card data.” The report also encourages retailers to implement tokenization technology for online and mobile transactions.

  • Lawmakers should clarify the roles of data owners and data maintainers in providing notices. Interestingly, the report recommends that the California legislature should clarify the notice obligations of owners and maintainers under the law. Specifically, the report explains that the law appears to require data maintainers to notify data owners of breaches, while the data owners must notify the affected individuals. Given this difference in responsibility, important breach notices may be delayed because the owners and maintainers may not agree on their respective obligations.

ARTICLE BY

Barbara Murphy Melby
Christopher C Archer
OF
Morgan, Lewis & Bockius LLP