Our colleagues , at Epstein Becker Green, have a post on the Hospitality Employment and Labor blog that will be of interest to many of our readers in the retail industry: “Ninth Circuit’s Decision Holds That Salary History Is Not a Defense to Equal Pay Claims.”

Following is an excerpt:

The federal Equal Pay Act (“EPA”) mandates equal pay for equal work regardless of sex.  Employers that pay men and women different wages for the same work are strictly liable for violations of the EPA unless they can show that one or more of four exceptions apply to explain the wage disparity. The four statutory exceptions are seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.”  The Ninth Circuit recently took up the question of the meaning of the fourth, catchall exception – “any factor other than sex” – in order to consider whether an employer may rely, in whole or in part, on an employee’s prior salary as a basis for explaining a pay differential in Aileen Rizo v. Jim Yovino. …

Read the full post here.

On September 13, 2017, California legislators passed California Bill AB 450, also known as the Immigrant Worker Protection Act (“the Act”).  The Act is one of three immigration bills currently awaiting Governor Jerry Brown’s approval or veto.[1]

The Act imposes specific restrictions on employers in instances where U.S. Immigration and Customs Enforcement (“ICE”) agents seek access to their workplaces for immigration enforcement. Specifically, the Act prohibits employers from (1) voluntarily consenting to allow an ICE agent to enter nonpublic areas of the workplace absent a judicial warrant; and (2) voluntarily consenting to allow an ICE agent to access, review, or obtain employee records, absent a subpoena or a court order.

Additionally, the Act requires employers to (1) post written notice[2] of an immigration agency’s intent to audit employee records, including I-9 Employment Eligibility Verification forms, within 72 hours of the employer receiving notice of such an inspection; and (2) following an immigration agency’s audit, provide each employee who was found to lack work authorization with a copy of the written results of the inspection within 72 hours of the employer’s receipt.

Violations of the Act may result in a civil penalty of between two thousand dollars ($2,000) and five thousand dollars ($5,000) for a first violation and between five thousand dollars ($5,000) and ten thousand dollars ($10,000) for each subsequent violation, to be enforced by the Labor Commissioner or the Attorney General. All penalties recovered under the Act shall be deposited in the Labor Enforcement and Compliance Fund.

At this time, the ultimate constitutionality of the Act is uncertain under Chamber of Commerce v. Whiting, 563 U.S. 582 (2011), in view of the steep monetary penalties it threatens to impose.

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[1] California legislators also recently passed the California Values Act (which is intended to prevent law enforcement officials from questioning and detaining individuals based on immigration violations alone) and the Immigrant Tenant Protection Act  (which prohibits landlords from reporting or threatening to report the immigration status of their tenants as a form of retaliation or to prompt an eviction.)

[2] No later than July 1, 2018, the Labor Commissioner will release a template to assist employers in complying with the notice posting requirements imposed by the Act.

Our colleagues , at Epstein Becker Green, have a post on the Health Employment and Labor blog that will be of interest to many of our readers in the retail industry: “DFEH Publishes Materials to Assist Employers With Handling Harassment Allegations.”

Following is an excerpt:

The Department of Fair Employment and Housing (DFEH) recently released a brief, nine-page guide for California employers, which was prepared in conjunction with the California Sexual Harassment Task Force.  This guide is intended to assist employers in developing an effective anti-harassment program, including information about how to properly investigate reports of harassment and understand what recourse is available.  The guide addresses all forms of workplace harassment, including harassment based on sex. …

Read the full post here.

This issue of Take 5 encapsulates the incredible breadth of societal changes and challenges facing the entire retail workplace. The topics addressed below reflect a microcosm of the many issues currently facing our overall society, covering growing political activism in the workplace, increasing expectations to accommodate religious beliefs, otherwise outrageous employee speech that may very well enjoy protection under the law, and the ever-increasing requirements for criminal background checks enacted piecemeal by states and cities. These extremely topical subjects often tap into broader emotionally charged concerns encountered by retailers.

We also address the ever-timely issue of wage and hour classification, in this case, focusing on the classification of assistant store managers.

The articles in this Take 5 include:

  1. Managing Employees’ Political and Social Activism in the Workplace
  2. Religious Accommodation: Handling Unusual Requests
  3. Second Circuit Agrees with NLRB That Employee’s Vulgar Facebook Tirade Against Manager Is Protected Concerted Activity
  4. Increasing Criminal Background Check Requirements Pose Challenges for National Retailers
  5. Correctly Classifying Assistant Store Managers to Avoid Wage and Hour Misclassification Claims

Read the full Take 5 online or download the PDF.

On April 27, 2017, the Ninth Circuit[1] issued an opinion in Aileen Rizo v. Jim Yovino that provides employers with guidance on how to lawfully implement facially-neutral business policies using prior salary information to set a new employee’s salary, without running afoul of the federal Equal Pay Act (“EPA”). While there has been some backlash regarding this recent decision, the Court’s ruling was consistent with its prior holding in Kouba v. Allstate Insurance Co.[2] when it vacated the lower court’s decision that denied Defendant Jim Yovino’s (“County”[3]) motion for summary judgment, and directed that the lower court consider the County’s hiring procedures in light of certain factors set forth in the Kouba case (as detailed below).

In 2009, Plaintiff Aileen Rizo (“Plaintiff”) began working for the Fresno County School District. Her starting salary was determined using the school district’s standard salary schedule, “Standard Operating Procedure 1440[4],” which was routinely and uniformly applied to all management-level employees, including Plaintiff. Based on the County’s application of this facially neutral policy, which is based on an employee’s prior salary, Plaintiff’s pay was lower than those of her colleagues with higher past salaries, including her male coworkers.

The pay disparity between Plaintiff and her male coworkers was undisputed by the County in this case. But, the County argued that its use of prior salary falls squarely under one of the affirmative defenses to the EPA – i.e., that prior salary amounts to an “other factor other than sex.”[5]

Plaintiff responded by arguing that if an employer’s pay structure is based “exclusively on prior wages,” then any resulting pay differential between men and women cannot be interpreted to be based on “any other factor other than sex.” Her position was consistent with Tenth and Eleventh Circuit decisions and the EEOC’s stance on this topic. Plaintiff further claimed that the use of prior salary alone can’t be considered a “factor other than sex” because it perpetuates existing pay disparities and further undermines the purpose of the Equal Pay Act. The lower court agreed with Plaintiff and found that women’s earlier salaries are likely to be lower than men’s because of historical gender bias; but, the District Court also acknowledged that its decision potentially conflicted with the 1982 decision in Kouba.

On appeal, the Ninth Circuit vacated the District Courts decision and held that its earlier decision in Kouba was controlling in the present case.  In its opinion, the Ninth Circuit held that the Kouba decision “allow[s] an employer to base a pay differential on prior salary so long as it showed that its use of prior salary effectuated some business policy and that the employer used the factor reasonably in light of its stated purpose and its other practices.”  Here, the County offered four business reasons for it policy: (1) the policy is objective, in the sense that no subjective opinions as to the new employee’s value enters into the starting-salary calculus; (2) the policy encourages candidates to leave their current jobs for jobs at the County, because they will always receive a 5% pay increase over their current salary; (3) the policy prevents favoritism and ensures consistency in application; and (4) the policy is a judicious use of taxpayer dollars.

The matter was remanded to the District Court for (1) an evaluation of the four business justifications offered by the County regarding its gender-neutral preset pay scale, and (2) a determination of whether the County’s use of employees’ prior salary is “reasonable in light of [its] stated purpose” under the standard set forth in Kouba.

Many states, including California, recently revised their state law equal pay protections to address the use of prior pay in hiring decisions, and whether it perpetuates prior pay discrimination. In particular, California’s equal pay law now includes a provision that expressly prohibits the use of prior salary “by itself [to] justify any disparity in compensation.” Interestingly, California’s amendment, which was passed prior to the Ninth Circuit’s decision, was not addressed at all in the decision. But, arguably here, all allegedly discriminatory decisions were made prior to the amendment’s passage.

In light of these new state and local laws’ prohibitions and/or restrictions on the use of prior pay as a determinant in setting an applicant’s salary, even if the Ninth Circuit finds that the federal Equal Pay Act permits the use of pay history for this purpose (under certain circumstances), in many jurisdictions, state and local laws will prohibit it. Employers should be aware both of the split in the circuits on this issue, and also of any applicable amendments to state and local equal pay laws that may impact their ability to rely on prior pay in setting an applicant’s rate of pay.

[1] The panel included Circuit Judges A. Wallace Tashima and Andrew D. Hurwitz and the Honorable Lynn S. Adelman, U.S. District Judge for the Eastern District of Wisconsin, sitting by designation.

[2]Kouba v. Allstate Insurance Co. ( 9th Cir. 1982) 691 F.2d 873.

[3] As Defendant Jim Yovino was sued in his official capacity as the Fresno County Superintendent of Schools, the Ninth Circuit utilized the word “County” when referring to the Defendant. For simplicity, we utilize the same term.

[4] To determine a candidate’s salary using “Standard Operating Procedure 1440,” the County applies a 5% increase to an individual’s most recent prior salary, then places the candidate on a “step” of the County’s salary schedule based on that calculated amount. This schedule consists of twelve “levels,” each of which contains ten “steps.”

[5] Under the EPA, a wage disparity is permissible if an employer can plead and prove an affirmative defense based on one of the following exceptions: (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex.

On December 9, 2016, Los Angeles Mayor Eric Garcetti signed ordinances no. 184652 and 184653, collectively referred to as the “Fair Chance Initiative.” These ordinances prohibit employers and City contractors (collectively “Employers”), respectively, from inquiring about job seekers’ criminal convictions until after a conditional offer of employment has been made. Both ordinances will go into effect on January 22, 2017 and will impact all employers in the City of Los Angeles and for every position which requires an employee to work at least an average of two hours per week within the City of Los Angeles and all City contractors and subcontractors, regardless of their location.

No Criminal Inquiry Until After Offer

Specifically, these ordinances prohibit Employers from inquiring about a job applicant’s criminal history, at any time or in any manner, unless and until a Conditional Offer of Employment has been made to the applicant. Following the Conditional Offer of Employment, Employers are permitted to request information regarding the applicant’s criminal history. However, Employers can only withdraw or cancel the conditional offer as a result of the applicant’s criminal history after engaging in the “Fair Chance Process.”

New “Fair Chance Process” Required

The “Fair Chance Process” requires Employers to prepare a written assessment highlighting the specific aspects of the applicant’s criminal history that pose an inherent conflict with the duties of the position sought by the applicant. Employers must provide the applicant with written notification of the proposed withdrawal of the conditional offer, a copy of the written assessment regarding the risks posed by the applicant’s criminal history, and any other relevant documentation. The applicant is then given an opportunity to provide the Employer a response to the written assessment, including any supporting documentation. Employers must wait at least 5 business days after the applicant is informed of the proposed withdrawal before taking any action, including filling the position for which the applicant applied.

New Posting and Recordkeeping Requirements

Additionally, Employers’ job postings must now include a notice stating that they will consider all qualified applicants regardless of their criminal histories, in compliance with these ordinances. Employers must also conspicuously post a notice regarding the “Fair Chance Initiative” in a location in the workplace visible to all job applicants; this notice must also be sent to each union or workers’ group with which the employers have any agreement that governs over employees. Further, Employers must retain all job application documents for three years. Penalties for violations of these ordinances may be assessed at up to $500 for the first violation, up to $1,000 for the second violation, and up to $2,000 for subsequent violations. The City may then, at its discretion, distribute a maximum of $500 from that penalty directly to the applicant. The penalty provision of the ordinances will not go into effect for employers in Los Angeles City until July 1, 2017. However, the penalty provision for City contractors is effective immediately.

Exceptions from these ordinances include: (1) employers who are required by law to seek a job applicant’s criminal history; (2) positions for which an applicant would be required to possess or use a firearm; (3) positions which, by law, cannot be held by an individual with a criminal history; and (4) employers who are prohibited, by law, from hiring persons with criminal convictions.

Employers with operations in the City of Los Angeles should:

  1. Remove questions regarding criminal history from job applications;
  2. Ensure future job postings include required equal employment notices;
  3. Defer inquiries regarding criminal history until making conditional job offers; and
  4. Ensure the Fair Chance Process is followed before denying employment based on criminal history.