Private Education Matters: December 2022

Private Education Matters

415.512.3000, 559.256.7800, 916.584.7000 or 619.481.5900

COVID-19

Allows

Denied

COVID-19.

For Costs

Amy’s Kitchen (Amy’s) employs over 2,500 people to manufacture organic and vegetarian meals at facilities in California, Oregon, and Idaho. Its headquarters are located in Petaluma, CA. Amy’s purchased a comprehensive property insurance policy from Fireman’s Fund Insurance Company (Fireman’s) for a one-year period ending in July 2020.

The policy included coverage extensions for communicable disease and for loss avoidance and mitigation. The communicable disease coverage extension stated that Fireman’s “will pay for direct physical loss or damage to Property Insured caused by or resulting from a covered communicable disease event at a location including the following necessary costs incurred to: ... mitigate, contain, remediate, treat, clean, detoxify, disinfect, neutralize, cleanup, remove, dispose of, test for, monitor, and assess the effects [of] the communicable disease.” The policy defines “communicable disease event” as one in which “a public health authority has ordered that a location be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease at such location.” The loss avoidance or mitigation coverage extension states that Fireman’s will pay the “necessary expense you incur to protect, avoid, or significantly mitigate potential covered loss or damage that is actually and imminently threatening Property Insured.”

Amy’s submitted a claim to Fireman’s for costs incurred to clean, disinfect, and test its facilities for COVID-19 under both the communicable disease and loss avoidance and mitigation extensions. Fireman’s denied the claim, and Amy’s sued the insurance company for denial of coverage.

In its complaint, Amy’s alleged COVID-19 was present at its facilities because some employees had confirmed cases, prompting Amy’s to take measures to mitigate, clean, disinfect, test, and monitor for COVID-19.

Amy’s further alleged that public health orders required Amy’s to implement various disinfection and sanitization measures to continue its operations.

The trial court granted Fireman’s demurrer to dismiss the complaint without leave to amend the complaint. Amy’s appealed.

The Court of Appeal agreed that the trial court correctly granted the demurrer, but that it was wrong to deny Amy’s leave to amend its complaint. The Court of Appeal noted that the insurance policy did not define the phrase “direct physical loss or damage,” but disagreed with the trial court’s determination that this phrase required physical alteration or change to property. The Court of Appeal explained that an insurance policy must be construed in light of how a reasonable layperson - a non-attorney - would read the language, not how insurance coverage lawyers understand terms of art defined by courts. Accordingly, requiring Amy’s to show a physical alteration to property in order to trigger the communicable disease extension would not be a reasonable interpretation of the extension. The extension covers costs incurred to mitigate, clean, disinfect, test, monitor, and assess the effects of the communication disease, and the plain language does not require that the property be torn out, repaired, or replaced.

Ultimately, the Court of Appeal reversed the trial court and directed the trial court to allow Amy’s to amend their complaint.

Amy’s Kitchen, Inc. v. Fireman’s Fund Ins. Co. (2022) 83 Cal. App. 5th 1062.

Note:

This case signals a growing trend that courts are now construing insurance policy language for COVID-19 property damage cases the way they would be read by a reasonable laypersons.

Court

Manufacturer To Amend Complaint Against Insurer That

Coverage

Incurred To Clean Facilities For

Court Upholds University Of Colorado’s Vaccination Policy.

On September 1, 2021, the University of Colorado (University) implemented a vaccination policy such that unvaccinated individuals who did not have a medical or religious exemption would not be allowed to access the University’s Medical Campus facilities. On September 24, 2021, the University amended its vaccination policy. Under the amended policy, medical accommodations were still available to employees and students, but religious accommodations were no longer available to students. Current and former employees and students of the University’s Medical Campus (Plaintiffs) sued the University alleging that the University violated their rights by denying their requests for religious exemptions from the University’s COVID-19 vaccination requirement, and requested that the court stop the enforcement of the amended policy through injunctive relief.

The U.S. District Court of Colorado denied the Plaintiffs’ request for injunctive relief. The court concluded that with respect to the amended policy, the Plaintiffs had not shown a likelihood of success on the merits because the policy is neutral on its face and as applied to the Plaintiffs, generally applicable, and rationally related to the goal of protecting public health. The court first noted that under the Constitution, the right of the free exercise of religion does not relieve an individual of the obligation to comply with an otherwise valid and neutral law that is generally applicable. The court stated that the University’s amended policy is neutral because it applies to anyone who works or learns

on the University’s Medical Campus. The policy does not restrict any religious practices because of their religious nature. The court also found the policy was neutral as applied to the Plaintiffs. Allowing employees, but not students, to request religious accommodations treats employees and students differently, but it does not single out religion or religious practices. Additionally, the Plaintiffs have not shown a likelihood of establishing that the University implemented the amended policy “with the aim of suppressing religious belief, rather than protecting the health and safety of students, staff, and the community.” The court noted that contrary to this, the fact that the University amended its policy while navigating a global pandemic does not show that its reasons for denying religious exemptions to students are pretextual.

The court also found that the University has a compelling interest in ensuring that employees and students associated with the University’s medical campus are vaccinated against COVID-19 for their patient’s health and safety, as well as their own. The court noted that during this pandemic, the public interest is not served by adding to that burden additional uncertainty about colleagues’ vaccination status.

Does v. Board of Regents of the University of Colorado (D. Colo. Sept. 29, 2022) No. 0:22-cv-01027, 2022 WL 4547563.

NOTE:

This is a Colorado case and therefore not binding in California. However, this case provides insight into how a federal court interpreted a University’s COVID-19 vaccination policy.

LCW In The News

To view these articles and the most recent attorney-authored articles, please visit: www.lcwlegal.com/news.

• Recently published in HR News, LCW attorney Nathan Jackson writes on the legal risks of using of Artificial Intelligence in hiring practices today. He notes that "AI and other types of automated decision-making tools run the risk of screening out applicants or employees based on protected characteristics or conditions, inadvertently replicating human biases or relying on data that serves as a proxy for protected characteristics or conditions."

• Quoted in Law360’s recent article “Worker Organizing At UC, Private Schools Face Distinct Tests”, LCW Partner Lisa S. Charbonneau stated, “Public agency organizing in the state of California has been around since the late ‘60s and ‘70s. Public sector unions [in California] in general are very powerful, are respected.”

employeesLaborrelations

National Labor Relations Board Expands Make-Whole Remedy To

Include Compensation For All Direct Or Foreseeable Financial Harms.

Thryv, Inc. operates a marketing agency that sells Yellow Pages advertising and other marketing products. The International Brotherhood of Electrical Workers (IBEW) represents a unit of employees that includes Thryv’s outside salesforce. Thryv laid off six salesforce employees over the objections of IBEW.

The Board, in a 3-2 ruling, held that Thryv violated the federal National Labor Relations Act (NLRA) by unilaterally laying off this group of employees before bargaining with the union. In doing so, the Board also added “all direct or foreseeable pecuniary harms suffered as a result” of an unfair labor practice to the remedies available to the affected employees.

Prior to this decision, employees seeking relief under the NLRA were limited to “make-whole remedies” such as backpay and reinstatement as a result of an unfair labor practice. However, on September 8, 2021, newly appointed NLRB General Counsel Jennifer A. Abruzzo issued a memorandum that pushed for expanded remedies against employers. In November 2021, the Board also solicited comments on the scope of make-whole remedies, signaling its intent to add consequential damages. Fourteen amicus briefs, filed on behalf of workers and management, weighed in on the potential change.

Now employers may be liable for consequential damages, which may include out of pocket expenses, credit card debt, “other costs… in order to make ends meet,” or any other “direct and foreseeable” financial harm employees alleged to have suffered. In this case, the Board ordered Thryv to compensate the laid off employees for “reasonable search-for-work and interim employment expenses.” Additionally, the Board ordered Thryv to pay the affected employees for any adverse tax consequences of receiving a lump-sum backpay award.

The Board made clear that it will not reserve this expansion of this remedy to only the most “egregious” unfair labor practices because the remedies are restorative and not punitive. Additionally, the Board announced that it will apply this remedy retroactively to all cases currently pending. The NLRB General Counsel’s office, which prosecutes unfair labor practices, must present evidence during the proceedings to establish the amount of economic harm and why the employer is responsible for those damages. Employers will have the opportunity to challenge the amount and dispute why the harm was not direct or foreseeable.

Thryv, Inc., 372 NLRB No. 22 (Dec. 13, 2022).

Note:

Legal challenges to this expanded remedy are likely, given the significant implications on the make-whole remedy now available to workers.

LCW will be closely monitoring any appeals.

disability

Teacher Can Proceed With Disability Discrimination Claim

After District Called Her “A Liability”

When It Revoked Her Conditional Job Offer.

In 2003, La Vonya Price had a serious stroke that left her paralyzed. After years of physical therapy and hard work, Price slightly recovered and relearned how to speak, walk, and use her body. Price still had some permanent paralysis, limited mobility, and issues lifting and grasping objects.

In 2018, Price was working as a substitute Instructional Assistant for the Victory Valley Union High School District when a full-time position opened up. Price applied and received a conditional offer of employment, contingent on her passing a physical examination, a requirement that the District required of all full time hires. Price had not been required to pass a physical to work as a substitute in the same position.

Price failed this physical examination, which a third-party medical professional administered. The District rescinded her job offer, stating that she was a “liability.”

The District also stated in a letter to Price that her failure on the physical examination disqualified her from her current position as an Instructional Assistant and any future positions with the District.

Price sued the District for several claims, including disability discrimination in violation of the Fair Employment and Housing Act (FEHA). The trial court granted the District’s motion for summary judgment and entered judgment for the District. Price timely appealed.

The FEHA prohibits an employer from refusing to hire an applicant based on the applicant’s actual or perceived physical disability. To assess Price’s FEHA discrimination claim, the California Court of Appeal used the McDonnell Douglas burdenshifting framework. Under the McDonnell Douglas test, Price had the initial burden of establishing a prima facie case of disability discrimination by showing that she: 1) had a disability or was regarded as having a disability; 2) could perform the essential duties of a job with or without reasonable accommodations; and 3) was subjected to an adverse employment action because of the disability or perceived disability.

As to the first essential element of Price's claim for disability discrimination, the Court agreed that a jury could reasonably conclude that the District regarded Price as disabled. Price failed the “physical” test during her physical examination, and the doctor concluded that Price was not “medically suitable for the position.” Based on the doctor’s report, the District rescinded Price’s job offer. From this evidence, a jury could conclude that the District regarded Price as having, or potentially having, a physical disability that limited her workrelated abilities.

Second, a triable issue of fact also existed as to whether Price could perform the essential functions of the position with or without reasonable accommodation. The District argued Price could not perform the essential functions of a special education Instructional Assistant because Price could not run after students. As a substitute Instructional Assistant, however, Price successfully performed, even though she frequently had to run after students. Moreover, the District taught special needs students in five different settings. While the students in the emotionally disturbed setting might be runners, students in other settings would not be runners. Price possibly could have been placed in three special needs settings where students do not require any physical assistance or physical supervision.

Third, the parties agreed that the revocation of Price’s job offer was an adverse employment action. The Court found that there was a triable issue of fact as to whether Price’s disability was a substantial motivating reason for the District’s decision to rescind the offer. The District determined that Price was “NOT medically suitable for the position” because of the strength and balance deficits in her right leg. According to Price, when she asked for more of an explanation about that decision, the District told her several times, “you are a liability.” Taken together, a reasonable jury could find that the District rescinded Price’s job offer because of an actual or perceived disability or potential disability.

The Court of Appeal assumed, without deciding, that the District’s legitimate reason for rescinding Price’s conditional job offer was because of the doctor’s report that found she was not medically qualified.

The Court then examined the final step in the McDonnell Douglas framework, and found that Price raised a triable dispute as to whether the District’s reason for revoking her offer was a pretext. The Court agreed with Price that the fact that the District told her “you are a liability” several times during their meeting when the District rescinded her job offer was sufficient evidence of pretext to deny the District’s motion for summary adjudication.

Price v. Victor Valley Union High Sch. Dist., 2022 WL 16845113 (Nov. 9, 2022).

Note: This is another California Court of Appeal case that has found that calling an applicant or employee a “liability” is evidence of discriminatory animus on the basis of disability.

new to the Firm!

Victor D. Gonzalez, an associate in the Los Angeles office, provides representation and counsel to clients in all matters pertaining to labor and employment law. Prior to joining LCW, Victor was an Agency Attorney at The New York City Commission on Human Rights.

Anthony Co, an associate in the Fresno office, advises public agency clientele on all matters pertaining to employment and labor. Anthony comes to LCW after gaining employment law experience through his internship at the Equal Employment Opportunity Commission, where he investigated claims at different points in the charge process.

Morgan J. Johnson, an associate in the Fresno office, focuses his practice on matters pertaining to employment, education, and labor law for public agencies. Prior to joining LCW, Morgan gained legal expertise through his time at a nonprofit where he conducted legal research, prepared legal memorandum, and drafted motions on labor union free speech issues.

Ashlyn Marquez, a Labor Relations Consultant in the San Francisco office, has dedicated her career to providing labor law advice and counsel to public and private employers. As an expert in labor relations, she not only supports in the development of labor proposals, bargaining strategies, and personnel policies but also regularly conducts complex workplace investigations.

Employee’s Evidence That

A Single Male Colleague Wins EPA Wage Claim, But Not FEHA Sex Discrimination

Claim.

Joyce Allen began working at Staples in 2006 as a sales representative. In March 2015, she took a position as an outside facilities area sales manager (ASM). While holding this position she reported to a field sales director (FSD). In the summer of 2017, Allen was promoted to FSD. In February 2019, several FSD’s, Allen included, were laid off because of a corporate reorganization.

In March 2019, Allen sued Staples for violating California’s Equal Pay Act (EPA), gender discrimination, sexual harassment, and other claims under the Fair Employment and Housing Act (FEHA). Allen’s claims were dismissed via summary judgment. Allen then appealed to the California Court of Appeal.

The Court of Appeal first considered the EPA claim. At the relevant times during Allen’s employment, Labor Code Section 1197.5 stated that “No employer shall pay any individual in the employer’s employ at wage rates less than the rates paid to employees of the opposite sex in the same establishment for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where the payment is made pursuant to a seniority system, a merit system, a system which measures earnings by quantity or quality of production, or a differential based on any bona fide factor other than sex.” (Note that Labor Code Section 1197.5 was amended, effective January 2019 to make it more employee-friendly.)

To show a prima facie case of sex-based wage discrimination under the EPA, an employee must establish that the employer pays different wages to employees of the opposite sex who are doing substantially similar work under similar conditions. Then, the burden shifts to the employer to prove the wage disparity is based on a bona fide factor other than sex.

Here, the Court of Appeal found that Allen showed that she was paid $22,000 less in base salary than a male ASM and $48,000 less in base salary than a male FSD. This, the Court of Appeal held, was enough to establish a prima facie case.

Staples reported that the salary differences were based on time with the company and overall experience. However, Staples only showed this in a general sense and did not show the specific factors that caused the pay differences between Allen and the specific male ASM’s and FSD’s who were paid more. As a result, Staples had not fully carried its burden and the Court of Appeal reversed the summary judgment.

Allen then argued that her success in showing a prima facie case of unequal pay, also proved a prima facie case of sex discrimination under the FEHA. The Court of Appeal analyzed Allen’s argument under the McDonnell Douglas burden shifting framework: “a plaintiff may establish a prima facie case for unlawful discrimination by providing evidence that ‘(1) he [or she] was a member of a protected class, (2) he [or she] was qualified for the position he [or she] sought or was performing competently in the position he [or she] held, (3) he [or she] suffered an adverse employment action, such as termination, demotion, or denial of an available job, and (4) some other circumstance suggests discriminatory motive.”

Once that prima facie case is established, the burden shifts to the employer to show that its action was motivated by legitimate, nondiscriminatory reasons. A reason is legitimate if it is facially unrelated to prohibited bias, and which if true, would thus preclude a finding of discrimination. If the employer meets this burden, the employee then must show that the employer’s reasons are pretexts for discrimination, or produce other evidence of intentional discrimination.

Here, the Court of Appeal held that, even though Allen made a prima facie case of unequal pay discrimination, she could not satisfy the burden of establishing a connection between the pay disparity and her gender. None of the evidence Allen provided regarding allegedly discriminatory workplace conduct was linked to salary decisions. Instead, Staples’ evidence showed that female ASM’s were paid more on average than male ASM’s, and some male AMS’s and FSD’s were paid

She Was Paid Less Than

lower salaries than Allen. The Court of Appeal found the trial court properly granted summary judgment on the FEHA discrimination claim.

Allen v. Staples, Inc., 84 Cal. App. 5th 188, 299 Cal. Rptr. 3d 779 (2022).

Note: This case highlights the different evidence needed to prove an EPA wage claim and a FEHA sex discrimination claim. On the EPA claim, the employer lost because it did not provide evidence of a bona fide factor other than sex to explain why a specific male employee received a higher wage than the female employee who sued. On the FEHA sex discrimination claim, the employer won because the female employee could not link her lower pay to any act of alleged sex discrimination. Employers can prevent EPA claims by using pay practices and procedures that are based on bona fide factors other than sex and by documenting the legitimate bases for pay decisions.

Sixth Circuit Holds University Cannot Avoid Gender Discrimination Lawsuit By Cancelling Job Search.

In 2017, Mark Charlton-Perkins (Plaintiff), a male research scientist, applied to be a professor at the University of Cincinnati (University). A designated search committee considered all of the applicants and interviewed the top four candidates, which included two females and two males, including the Plaintiff. The committee took a final vote on the candidates, and rated Plaintiff as the favorite by a vote of three to one, followed by the two women. The other male candidate was eliminated.

Under the Collective Bargaining Agreement between the faculty and University, the search committee was vested with the authority to determine the candidate to be selected for the position.

Dr. George Uetz, the Department Chair, told the search committee that Kenneth Petren, the Dean of the College of Arts and Sciences, wanted “to focus on the women candidates first.” Dr. Uetz also conveyed that Dean Petren “felt that he might make a case to hire two strong women candidates.” The search committee chair responded to Dr. Uetz by stating that “putting two lower-ranked candidates up first is not only against the recommendation of the committee but also plain discrimination.” Shortly after, the Dean informed the faculty that he was canceling the search in its entirety.

Plaintiff sued the University claiming they failed to hire him due to his gender. Plaintiff alleged that he was the most qualified candidate for the position but was passed over for the position because University officials preferred the two lower-ranked female finalists for the position.

The trial court dismissed Plaintiff’s complaint, finding that Plaintiff did not suffer harm because no one else got the position. Looking to principles from Title VII, the trial court reasoned that no injury “in fact” occurs unless the plaintiff (1) is a member of a protected class, (2) was qualified for and applied for the job, (3) was denied it, and (4) an individual of similar qualifications not in the plaintiff’s protected class got the job. Here, because Plaintiff could not plausibly plead element (4), he suffered no “discrete harm,” in the trial court’s view, and would suffer none until someone else got the job. Plaintiff appealed.

On appeal, the U.S. Court of Appeal for the Sixth Circuit disagreed with the trial court. The Sixth Circuit relied on Supreme Court precedent that the prima facie case requirement for a case of discrimination under Title VII is not an “inflexible rule,” and may vary under particular factual circumstances. The Sixth Circuit stated that Plaintiff suffered an injury when the University did not select him for the position, and this injury had nothing to do with whether or not someone else got the job. The Sixth Circuit concluded that Plaintiff also adequately alleged that the University’s cancellation of the job search was itself discriminatory. The University not only failed to hire him because of his gender, but they then canceled the search itself as a pretext to conceal the discriminatory reason for the failure to hire.

Charlton-Perkins v. University of Cincinnati (6th Cir. 2022) 35 F.4th 1053.

NOTE:

This is a case from the Sixth Circuit and therefore not binding authority in California. However, this case provides educational institutions with insight into a federal court’s reasoning involving failure-to-hire cases and warns employers that it cannot avoid liability for discriminatory failure-to-hire by canceling a job search as a pretext to cover up its discrimination.

What Employers Should Know About California’s Contraceptive Equity Act of 2022

By: Brett Overby

This year, the California Legislature passed and the Governor approved the Contraceptive Equity Act of 2022 (Senate Bill 523 or SB 523), a piece of legislation intended to increase the ability of Californians to exercise full control over their reproductive decisions and to expand coverage and decrease access barriers to reproductive health services.

Among other things, Senate Bill 523 makes changes to the Fair Employment and Housing Act (FEHA) that take effect on January 1, 2023. SB 523 expands the FEHA to include “reproductive health decision-making” in the list of classifications protected by the FEHA. Reproductive health decisionmaking means, without limitation, “a decision to use or access a particular drug, device, product, or medical service for reproductive health.” As a result, beginning January 1, 2023, the FEHA will prohibit employmentrelated discrimination, harassment,

and retaliation based on employees’ reproductive health decision-making. SB 523 also makes it unlawful for an employer to require, as a condition of employment, continued employment, or a benefit of employment, the disclosure of information relating to an applicant’s or employee’s reproductive health decision-making.

SB 523 makes clear that the protected classification “sex” may also include reproductive health decision-making and the two classifications may overlap. “Sex” also includes things such as (1) pregnancy or medical conditions related to pregnancy; (2) childbirth or medical conditions related to childbirth; (3) breastfeeding or medical conditions related to breastfeeding; and (4) gender, gender identity, and gender expression.

The FEHA applies to private employers (its harassment protections apply to employers with one or more employees, while the remaining FEHA protections apply to employers with five or more employees) but the FEHA does not generally apply to non-profit religious associations or non-profit religious corporations. Nonprofit public benefit corporations formed by or affiliated with a religion that operate an educational facility as its sole or primary activity are

permitted under the FEHA to restrict employment and promotion to individuals of a particular religion. However, such public benefit corporations are still subject to the FEHA in all other respects.

To prepare for these changes to the FEHA that take effect on January 1, 2023, we recommend that employers revise their discrimination, harassment, and retaliation policies and other relevant policies to incorporate the new protections for reproductive health decision-making, including adding reproductive health decision-making to the list of protected classifications these policies set forth. Employers should also advise supervisors of the changes in the law, and keep in mind that these changes should be incorporated into the mandatory non-supervisory and supervisory harassment training.

The Contraceptive Equity Act of 2022 also makes various changes to the law governing health care service plans and health insurance policies intended to improve equitable access to preventive contraceptive care, which apply to health care service plan contracts and health insurance policies issued, amended, renewed, or delivered on and after January 1, 2024.

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2. Premium Membership - access to all of the benefits of our Basic Membership (see above), as well as the ability to download our entire collection of over 200 sample forms, policies and checklists in Word and PDF formats that can be used as templates for your school. We are also continually adding Model Policies that can be used to update existing school policies to our library. This is only available for Premium members.

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An Employee’s Communications To A Supervisor Regarding Possible Unlawful Activity Triggered The California Whistleblower Protection Act.

SpecPro Professional Services, LLC, is an environmental services firm that assists government agencies with the preparation of environmental assessments. The U.S. Army Reserve Command hired SpecPro to assist in preparing an environmental assessment for a new helicopter training area.

Aaron Killgore, an employee at SpecPro, was assigned this project. Killgore had a small team of colleagues and reported to his supervisor William Emerson. Killgore also reported to Chief Laura Caballero, the Army Reserve’s project leader.

Killgore and his team discovered that there were discrepancies between the facts they had found on the ground and what the Army Reserve wanted SpecPro to report in their environmental assessment. When Caballero directed Killgore to omit certain information from the report, Killgore pushed back and told Caballero that failing to report certain facts would violate a federal law called NEPA and other federal regulations.

Following this pushback, Caballero called Emerson to raise concerns about Killgore. Emerson then told Killgore to complete the report on time and to exclude the information that Caballero wanted excluded. Killgore again explained that this might be illegal but Emerson told Killgore that their chief goal was to keep Caballero happy to win any future Army Reserve contracts.

Killgore and his team eventually drafted the environmental assessment and included the information that Caballero wanted excluded. Caballero then instructed the team to take out the information and complained to Emerson and the general manager of SpecPro during a meeting. After this meeting, Emerson fired Killgore.

Killgore then filed a lawsuit against SpecPro, asserting that his termination violated the California Whistleblower Protection Act (CWPA). Labor Code section 1102.5 provides whistleblower protections to employees who disclose wrongdoing to authorities. Specifically, section 1102.5 prohibits an employer from retaliating against an employee for sharing information the employee “has reasonable cause to believe . . . discloses a violation of state or federal statute” or of “a local, state, or federal rule or regulation” with a government agency, with a person with authority over the employee, or with another employee who has authority to investigate or correct the violation. [emphasis added].

The District Court dismissed Killgore’s lawsuit because it ruled that Killgore’s communications to Emerson and Caballero were not protected by the CWPA. The District Court decided that because Emerson, a private citizen in the employ of a private business, did not have the power to correct the Army Reserve’s noncompliance, Killgore’s communications to Emerson were not protected. In doing so, the District Court interpreted section 1102.5(b) to mean that a protected disclosure must be made to “a person with authority over the employee” who also has the authority to “investigate, discover, or correct” the violation.

Emerson then appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit took up the question of whether Killgore’s communications were protected.

The Ninth Circuit found that the District Court incorrectly interpreted the CWPA by limiting the avenues for employees to report wrongdoing. The Ninth Circuit held that the CWPA prohibits employers from retaliating against employees who disclose potential wrongdoing through any one of several avenues: government or law enforcement agencies; a person with authority over the employee; other employees with authority to investigate, discover, or correct the violation or noncompliance; or any public body conducting an investigation, hearing, or inquiry.

Killgore v. SpecPro Pro. Servs., LLC, 51 F.4th 973 (9th Cir. 2022).

Note:

Did You Know?

• The Department of Industrial Relations released new rates for the computer software employees exemption, increasing the compensation threshold for these professionals by 7.6% compared to the 2022 rates. The compensation rates are adjusted annually to account for inflation according to the California Consumer Price Index (CCPI) for Urban Wage Earners and Clerical Workers. Employers must pay their computer professional employees that are classified as exempt computer professionals the new rates starting January 1, 2023.

• The EEOC has updated its “Know Your Rights” poster. Federal law requires covered employers to post this notice summarizing federal laws’ prohibition on job discrimination based on race, color, sex, national origin, religion, age, equal pay, disability or genetic information, and retaliation. The new poster, among other changes, notes that harassment is a prohibited form of discrimination and clarifies that sex discrimination includes discrimination on the basis of pregnancy and related conditions, sexual orientation, and gender identity. The posters should be placed in a conspicuous location in the workplace where notices to applicants and employees are customarily posted.

• The Federal Trade Commission (FTC) issued a new policy statement regarding what it believes to be its authority under Section 5 of the FTC Act. The new guidance outlines the FTC’s intentions of enforcing unfair methods of competition under the FTC Act and expands the FTC’s authority under Section 5 to investigate and file lawsuits, especially where the FTC believes there is consumer harm but it is unable to meet the requirements under other antitrust laws. The policy statement does not have any legal force, but is a statement of FTC’s intention to expand antitrust enforcement.

For more information on some of our upcoming events and trainings, click on the icons below:

This case is a helpful reminder of the statutory framework for whistleblower claims. If an employee comes to a supervisor, or to any individual who has any authority to investigate or correct a violation of the law, it should be treated as a protected CWPA communication and investigated. In general, employees who bring concerns of wrongdoing to their employers or supervisors should be taken seriously, and their concerns promptly investigated. Consortium

Whether you are looking to impress your colleagues or just want to learn more about the law, LCW has your back! Use and share these fun legal facts about various topics in labor and employment law.

Wage&Hour

Employers Who Accurately Capture Employees’ Time Down To The

Minute, Must Pay Employees For

Every Minute Worked.

Home Depot uses a Kronos electronic timekeeping system. Employees use the system punch in and out for work shifts. The system records the time down to the minute when an employee punches in or out. Home Depot then applies a quarter-hour rounding policy to the total shift time worked by an employee. For example, if an employee works 6 hours and 7 minutes, their time sheet would reflect that they worked a 6-hour shift. If an employee worked for 6 hours and 8 minutes, their time sheet would reflect that they worked a 6.25hour shift.

Delmer Camp lost a total of 470 minutes of time worked over four and a half years of employment with Home Depot. He filed a lawsuit against Home Depot for unpaid wages.

Relying on previous case law, Home Depot filed a motion for summary judgment contending that its rounding system was neutral on its

face, neutral as applied, and otherwise lawful under the controlling case law. The trial court granted Home Depot’s motion. Camp appealed.

The California Court of Appeal first reviewed the relevant wage orders and the Labor Code and found that both contemplate that employees must be paid for all work performed. The Court of Appeal also noted that both the wage orders and Labor Code are concerned with even small amounts of worktime, such as small losses to individual employees that will occur when an employer uses a rounding system. Finally, the Court of Appeal found that unlike the Fair Labor Standards Act (FLSA) regulations, there is no language, in the Labor Code or in the applicable wage order that authorizes time rounding if : 1) the rounding causes the underpayment of an individual employee for all time worked; and 2) the employer can capture and has captured the employee’s worktime in minute increments.

The Court of Appeal next noted that there is no language in California law that authorizes time rounding that causes the underpayment of an individual employee for all time worked, if there is no administrative difficulty in capturing all worktime. Rounding work time only came into

existence because pay systems could not track time more precisely. With technological advancements, it is now easy to capture working time exactly, as Home Depot did in this case. The Court of Appeal observed that rounding now seems to be an additional step instead of a shortcut to accurate payments.

Home Depot could not refute any of these contentions. The Court of Appeal overturned the grant of summary judgment, and held that if an employer can and does accurately capture all time an employee works, the employee must be paid for all hours worked and cannot lose time, even because of a neutral and neutrally applied rounding policy.

Camp v. Home Depot U.S.A., Inc., 84 Cal. App. 5th 638 (2022).

Note:

This case highlights how California’s more employee friendly wage laws interact with the federal FLSA. The FLSA establishes a base line standard, but individual states like California can create greater employee rights. Note also that while California’s minimum wage law applies to public agency employers, California’s daily overtime standards do not.

drug testing

Applicants Not Entitled To Compensation For Time And Travel Expense For Pre-employment Drug Test.

WinCo Foods LLC operates a U.S. supermarket chain. When WinCo hires new employees, a Hiring Manager calls successful applicants to extend a conditional offer of employment. The offer is contingent upon the successful completion of a “pre-employment background check and drug test.” WinCo pays the drug testing fee but does not pay for travel expenses or the time required to test.

In 2017, a successful applicant named Alfred Johnson sued WinCo on behalf of himself and other employees and successful applicants. He sought compensation for the time and expense associated with the drug testing. Johnson advanced two primary contentions.

First, Johnson claimed he was an employee during the drug test because California applies a control test to determine whether an employment relationship exists, and WinCo controlled the administration of the drug test.

Second, Johnson contended that under contract law, the drug test should be regarded as a “condition subsequent” to his hiring as an employee.

The Ninth Circuit Court of Appeals dismissed both of Johnson’s contentions.

The Ninth Circuit first elaborated on the California control test, which assesses whether an employer controls the manner and means of performing a job or accomplishing a desired service. Here, WinCo directed Johnson to undergo a drug test at a certain place and time. The Ninth Circuit noted that employers also direct applicants to: appear for interviews at a certain place and time; undergo writing or skills tests; or even interview in a panel or in another way. None of these are required of someone who is already

employed. Simply put, the level of control WinCo had over applicants during the application process was not enough to “magically convert applicants into employees.”

Under contract law, an employment contract can be formed before or after a certain condition is satisfied. Johnson argued that the drug test was a condition subsequent, meaning that the employment contract was already created and WinCo could terminate the contract in the event of a drug test failure. WinCo argued the opposite, contending that the drug test was a condition precedent, meaning that an employment contract is not created until the applicant successfully passes the drug test.

Here, WinCo unequivocally communicated to applicants that the job offer was conditional and that the preemployment drug test was a condition of WinCo’s contingent offer. WinCo’s communication to applicants proved that the drug test was a condition precedent, one that must be satisfied before an employment contract and relationship is formed.

Because both of Johnson’s theories failed, the Ninth Circuit held that Johnson and his class members were not employees when they underwent the required drug test and were not entitled to reimbursement for related expenses.

Johnson v. WinCo Foods, LLC, 37 F.4th 604 (9th Cir. 2022).

Note:

The goal of the job applicants who filed this case was to trigger California Labor Code Section 2802. That law requires employers to reimburse employees for work- related expenses. This case highlights that a properly worded conditional offer of employment prevents an applicant from becoming an employee until the stated conditions have been met. Note too that in California: 1) pre-employment drug testing in the public sector may only be used for “special needs” jobs, such as positions that supervise children or that are safety sensitive; and 2) as of January 1, 2024, employment-related drug-testing in California cannot look for non-psychoactive cannabis metabolites, unless a federal contract or federal funding requirement specifies otherwise.

arbitration

California Appeals Court Rules PAGA Waiver Was

Unconscionable.

Juan Navas, Martha Herrera Lopez, and Benjamin Hernandez Ramos filed a class action lawsuit against Fresh Venture Foods (FVF) alleging, among other things, that the company did not pay them minimum and overtime wages. They also alleged a cause of action under the Private Attorneys General Act (PAGA) for civil penalties for themselves and other current and former employees for Labor Code violations.

FVF moved to compel arbitration of Plaintiffs’ claims. FVF alleged that Navas, Lopez, and Ramos signed arbitration agreements and agreed to arbitrate their individual claims against FVF, and therefore gave up the right to represent others in class or representative class actions. Navas, Lopez, and Ramos, however, claimed they did not recognize the arbitration agreement or their signatures on them. They also alleged the agreement was unconscionable.

The trial court found that FVF did not establish that Lopez, and Ramos entered into arbitration agreements. Ramos and Lopez testified in their depositions that they did not recall seeing or signing the document, and did not recognize the signatures on the agreement as theirs. Additionally, the trial court held the arbitration agreement signed by Navas was procedurally and substantively unconscionable. FVF appealed.

The Court of Appeal rejected FVF’s arguments that Ramos and Lopez were evasive and not credible. The Court of Appeal explained that witness credibility is decided exclusively by the trial court and that as an appellate court, it does not determine evidentiary conflicts.

The Court of Appeal then turned to Navas’s claim that the arbitration agreement was unconscionable.

Navas argued that the agreement was unconscionable because it required employees to waive their right to bring a PAGA suit in court. The Court of Appeal explained that under the recent U.S. Supreme Court ruling in Viking River Cruises, Inc. v. Moriana (2022) 142 S. Ct. 1906, employers in PAGA cases may now enforce arbitration agreements for individual PAGA claims. Previously, state case law held that employers cannot force employees to waive their right to bring PAGA claims in both 1) individual PAGA actions where the employee seeks damages for violations committed against the individual employee, and 2) “representative” actions where an employee seeks damages because of the employer’s PAGA violations committed against a group of employees.

Here, Navas’s arbitration agreement provides that “Fresh Venture Foods reserves the right” to enforce “the Waiver of Individuals to SelfRepresentation in Trials (Private Attorney General Waiver).” The Court of Appeal held that this provision of the arbitration agreement did not even give Navas the choice to arbitrate an individual PAGA claim

because it failed to explain to Navas, a Spanish-speaking employee, what is an individual PAGA claim before obtaining his consent to waive the right to file an individual PAGA claim in court. Therefore, the provision was invalid.

The Court of Appeal also held that the arbitration agreement terms are primarily one-sided in-favor of FVF. The agreement provided it “will be valid for all legal claims between [FVF] and [the employee].” But it then specifically describes the type of “Covered Claims” that fall within arbitration. They include disputes involving: wrongful termination; state and federal wage and hour laws; breaks and rest periods; training; discrimination; harassment; and “claims arising under state and federal statutes and/or common law relating to these or similar matters.” The agreement also provides, “There will be no right or authority under this Agreement for any dispute to be brought, heard, or arbitrated as a class or collective action.” The Court of Appeal reasoned that these are the only types of claims employees can bring against employers. Arbitration agreements that primarily require arbitration of the type of claims only employees bring against employers are substantively unconscionable as being “one-sided and harsh.”

The agreement also provided that employees can utilize internal complaint procedures of FVF. However, the agreement did not describe the procedures in the arbitration agreement, and therefore employees did not know what they were agreeing to. The Court of Appeal

held that the agreement “funnels employee claims into both arbitration and FVF’s own complaint system without requiring FVF to follow any defined procedure.”

The Court of Appeal held that given the number of unconscionable provisions in the arbitration agreement, the trial court reasonably determined that severance of those provisions was not an acceptable option. The Court of Appeal upheld the trial court’s determination that the entire agreement was unconscionable.

Navas v. Fresh Venture Foods, LLC (Cal. Ct. App. Nov. 21, 2022) 2022 WL 17087898.

Note:

This case is an example of how California courts will apply the U.S. Supreme Court’s decision in Viking River Cruises v. Moriana, which LCW previously reported on in the August 2022 Private Education Matters

Train the Trainer Program

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To learn more about our program, please visit our website below or contact Anna Sanzone-Ortiz 310.981.2051 or asanzone-ortiz@lcwlegal.com.

lcw best timeline

NOVEMBER THROUGH JANUARY

Issue Performance Evaluations

• We recommend that performance evaluations be conducted on at least an annual basis, and that they be completed before the decision to continue employment for the following school year is made. Schools that do not conduct regular performance reviews have difficulty and often incur legal liability terminating problem employees - especially when there is a lack of notice regarding problems.

• Consider using Performance Improvement Plans but remember it is important to do the necessary follow up and follow through on any support the School has agreed to provide in the Performance Improvement Plan.

Compensation Committee Review of Compensation before issuing employee contracts

• The Board is obligated to ensure fair and reasonable compensation of the Head of School and others. The Board should appoint a compensation committee that will be tasked with providing for independent review and approval of compensation. The committee must be composed of individuals without a conflict of interest.

Review employee health and other benefit packages, and determine whether any changes in benefit plans are needed.

If lease ends at the end of the school year, review lease terms in order to negotiate new terms or have adequate time to locate new space for upcoming school year.

Review tuition rates and fees relative to economic and demographic data for the School’s target market to determine whether to change the rates.

Review student financial aid policies.

Review, revise, and update enrollment/tuition agreements based on changes to the law and best practice recommendations.

File all tax forms in a timely manner: Forms 990, 990EZ

• Form 990:

ƒ

Tax-exempt organizations must file a Form 990 if the annual gross receipts are more than $200,000, or the total assets are more than $500,000.

• Form 990-EZ

ƒ

Tax-exempt organizations whose annual gross receipts are less than $200,000, and total assets are less than $500,000 can file either form 990 or 990-EZ.

• A School below college level affiliated with a church or operated by a religious order is exempt from filing Form 990 series forms. (See IRS Regulations section 1.6033-2(g)(1)(vii)).

• The 990 series forms are due every year by the 15th day of the 5th month after the close of your tax year. For example, if your tax year ended on December 31, the e-Postcard is due May 15 of the following year. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is the next business day.

practices

Each month, LCW presents a monthly timeline of best practices for private and independent schools. The timeline runs from the fall semester through the end of summer break. LCW encourages schools to use the timeline as a guideline throughout the school year.

• The School should make its IRS form 990 available in the business office for inspection.

Other required Tax Forms common to business who have employees include Forms 940, 941, 1099, W-2, 5500

Annual review of finances (if fiscal year ended January 1st)

• The School’s financial results should be reviewed annually by person(s) independent of the School’s financial processes (including initiating and recording transactions and physical custody of School assets). For schools not required to have an audit, this can be accomplished by a trustee with the requisite financial skills to conduct such a review.

• The School should have within its financial statements a letter from the School’s independent accountants outlining the audit work performed and a summary of results.

• Schools should consider following the California Nonprofit Integrity Act when conducting audits, which include formation of an audit committee:

ƒ Although the Act expressly exempts educational institutions from the requirement of having an audit committee, inclusion of such a committee reflects a “best practice” that is consistent with the legal trend toward such compliance. The audit committee is responsible for recommending the retention and termination of an independent auditor and may negotiate the independent auditor’s compensation. If an organization chooses to utilize an audit committee, the committee, which must be appointed by the Board, should not include any

members of the staff, including the president or chief executive officer and the treasurer or chief financial officer. If the corporation has a finance committee, it must be separate from the audit committee. Members of the finance committee may serve on the audit committee; however, the chairperson of the audit committee may not be a member of the finance committee and members of the finance committee shall constitute less than one-half of the membership of the audit committee. It is recommended that these restrictions on makeup of the Audit Committee be expressly written into the Bylaws.

JANUARY - FEBRUARY

Review and revise/update annual employment contracts.

Conduct audits of current and vacant positions to determine whether positions are correctly designated as exempt/non-exempt under federal and state laws.

FEBRUARY- EARLY MARCH

Issue enrollment/tuition agreements for the following school year.

Review field trip forms and agreements for any spring/summer field trips.

Tax documents must be filed if School conducts raffles:

• Schools must require winners of prizes to complete a Form W-9 for all prizes $600 and above. The School must also complete Form W-2G and provide it to the recipient at the event. The School should provide the recipient of the prize copies B, C, and

2 of Form W-2G; the School retains the rest of the copies. The School must then submit Copy A of Form W2-G and Form 1096 to the IRS by February 28th of the year after the raffle prize is awarded.

Planning for Spring Fundraising Event

Summer Program

• Consider whether summer program will be offered by the school and if so, identify the nature of the program and anticipated staffing and other requirements.

• Review, revise, and update summer program enrollment agreements based on changes to the law and best practice recommendations.

MARCH- END OF APRIL

The budget for next school year should be approved by the Board.

Issue contracts to existing staff for the next school year.

Issue letters to current staff who the School is not inviting to come back the following year.

Assess vacancies in relation to enrollment.

Post job announcements and conduct recruiting

• Resumes should be carefully screened to ensure that applicant has necessary core skills and criminal, background and credit checks should be done, along with multiple reference checks.

Summer Program

• Advise staff of summer program and opportunity to apply to work in the summer, and that hiring decisions will be made after final enrollment numbers are determined in the end of May.

• Distribute information on summer program to parents and set deadline for registration by end of April.

• Enter into Facilities Use Agreement for Summer Program, if not operating summer program

Transportation Agreements

• Assess transportation needs for summer/next year

• Update/renew relevant contracts

construction corner

LCW represents and advises private schools and colleges in various business, construction, and facilities matters, including all aspects of construction projects from contract drafting and negotiations to course of construction issues. Through this Construction Corner, LCW will be giving private schools and colleges monthly helpful tips on a variety of topics applicable to campus construction projects. LCW attorneys are available should you have any questions or need assistance with any construction projects no matter what phase you may be in currently.

California Construction Payments: The What and Why of Conditional Waivers & Releases

By: Heather DeBlanc

In California, claimants who are not paid on your construction project can file a mechanic’s lien on your property. In order to alleviate this risk, schools should make sure that their general contractors are collecting waivers and releases upon progress payments and final payment.

The California Civil Code provides forms for these waivers and releases in Sections 8132, 8134, 8136 and 8138. In order to effectively release a claim, the waiver and release must be in substantially the form provided by the statute and signed by the claimant.

• Section 8132 governs a Conditional Waiver and Release Upon Progress Payment;

• Section 8134 governs an Unconditional Wavier and Release Upon Progress Payment;

• Section 8136 governs a Conditional Waiver and Release Upon Final Payment; and

• Section 8138 governs an Unconditional Waiver and Release Upon Final Payment.

In order for the conditional releases to be effective, there also must be evidence of payment either by endorsement of a check or written acknowledgment of payment by the claimant.

The forms provided by these statutes are located at https://leginfo.legislature.ca.gov/faces/codes_displayText. xhtml?lawCode=CIV&division=4.&title=1.&part=6.&chapter=3.&article=

Schools should ensure that their construction contracts require a general contractor to provide unconditional waiver and releases upon each progress payment covering work for the prior payment application. This will avoid additional unanticipated claims as the project progresses. Upon final closeout, the school should collect an unconditional waiver and release upon final payment. Although schools could ask for conditional waiver and releases, they would also need to collect the required evidence of payment from the claimant, who is likely a subcontractor. This may prove difficult for the school.

Although many AIA and other form contracts include provisions for payment, these forms are not geared toward California laws. Schools should modify those contract provisions to ensure the contractor provides these forms to alleviate the potential risk of mechanic’s liens.

Stay tuned for a future Construction Corner article on Timing of Progress Payments.

The 411 On Consortiums:

Consortium Call Of The Month

LCW has four private education consortiums across the State! Consortium members enjoy access to quality training throughout the year, discounts on other LCW products and events, and unlimited, complimentary telephone consultation with an LCW private education attorney on matters relating to employment and education law questions (including business & facilities questions and student issues!). We’ve outlined a recent consortium call and the provided answer below. Client confidentiality is paramount to us; we change and omit details in the ERC Call of the Month.

A school administrator had three general questions about student enrollment agreements:

(1) Is it permissible to have a general waiver in an enrollment agreement? (2) Should the School include Children’s Online Privacy Protection Act (COPPA) waivers in their enrollment agreements? (3) Should enrollment agreements reference parent/ student handbooks?

Questions: Answers:

(1) Yes. General waivers are typically enforceable and provide important protections for schools. The California Supreme Court, for example, has specifically upheld the enforceability of a general waiver in an enrollment agreement. (See: City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747).

(2) Since COPPA does not apply to nonprofits, it is not recommended. However, the School may want to post privacy policies online (See: Question 5 - https://www.ftc.gov/business-guidance/resources/ complying-coppa-frequently-asked-questions).

(3) This is a best practice. It puts parents on notice that there are policies outside of the enrollment agreement that will apply to them and their children. However, it is important to include language in the enrollment agreement stating the policies may be updated from time to time (and it can be equally important to alert parents and students of revisions to those policies).

Liebert Cassidy Whitmore