Palmer Kazanjian Wohl Perkins Newsletter June 2006

In This Issue
June 2006
Reasonable Accommodation And Temporary Light-Duty Assignments
Sexual Harassment Prevention Training
Good, Bad And The Ugly Of The Contractor And Subcontractor Relationship
Construction, Drilling, Logging And Mining Employers May Need To Revise Collective Bargaining Agreements

Reasonable Accommodation and Temporary Light-Duty Assignments

One of the most difficult tasks for employers assessing the need to provide a reasonable accommodation to an employee with a disability under the Americans with Disabilities Act (ADA) or the Fair Employment and Housing Act (FEHA) is the assignment of “light duty” for extended periods of time. Employers have historically struggled with their obligation to provide light duty as a reasonable accommodation and how to determine when light duty should be terminated. Recently the California Appellate Court squarely addressed these issues.

In Raine v. City of Burbank, 135 Cal. App. 4th 1215, the California Court of Appeal for the Second District addressed the specific issue of the effect of a temporary light duty assignment on the obligation to reasonably accommodate an employee’s long term disability. In its opening statement of the case, the court framed the issue as follows:

Does an employer who reassigns an employee to a temporary light-duty position to accommodate the employee’s injury have an affirmative obligation under the FEHA to make that temporary light-duty assignment available indefinitely once the employee’s temporary disability becomes permanent?

Plaintiff in this case was a police officer injured on the job. It was conceded that his medical condition (a torn meniscus) made it difficult for him to do the essential functions of his job. In 1995, plaintiff was assigned a temporary light duty position at the front desk; a position he retained for six (6) years. In 2002 his personal physician advised the City of Burbank that plaintiff’s disability was permanent and that he would never be able to perform the essential functions of a patrol officer again. The City undertook the interactive process of determining a reasonable accommodation and concluded it had no available position for a police officer with plaintiff’s conceded medical condition.

The City did offer to accommodate plaintiff by placing him in a civilian position at the front desk; however, plaintiff was not interested in such a position that would result in a loss of benefits he enjoyed as a police officer. Plaintiff sought to have the civilian position “reclassified” as a sworn officer position affording him the same rights and benefits as other on-duty patrol officers.

In a rather detailed opinion, the Court first generally analyzed the employer’s obligation uder the FEHA to reasonably accommodate the disabled employee. The Court concluded that once the employer is on notice of the employee’s disability, the employer must choose a reasonable accommodation (not the best accommodation) that may include job restructuring, part-time or modified work schedules, or reassignment to a vacant position. If an employee cannot be accommodated in his existing position, the employer does have an affirmative obligation to place the employee in an “available” position for which the employee is qualified. Citing the United States Supreme Court in School Board of Nassau County v. Arline (1987) 480 U.S. 273, the California Court noted that “(a) reassignment, however, is not required if there is no vacant position for which the employee is qualified.”

The Court then moved to the more specific issue regarding the effect of the long term assignment to light duty on the obligation to reasonably accommodate. In other words, once it was determined that Plaintiff would not be able to perform the essential functions of a patrol officer was he entitled to a permanent position as a sworn officer at the front desk?

Federal Court precedent interpreting the ADA was pivotal in the California Court’s decision. Citing numerous Federal Court decisions from nearly every federal circuit the California Court found that under the ADA an employer has no obligation to transform a temporary assignment into a permanent position once the employer is informed that the employee’s condition is permanent. The federal decisions further affirm the California Court’s premise that where transforming a temporary assignment into a permanent assignment creates a new position or classification such a transformation could be considered an unreasonable accommodation.

Applying federal precedent to actions under the FEHA the California Court held that the same standard must apply. The FEHA does not require the employer to create a new position to accommodate an employee. Moreover, though Plaintiff argued that the City had the burden to prove that the accommodation requested would pose an undue hardship, (which, Plaintiff argued the City could not do since he held the position for six (6) years) the Court held that it was not necessary to reach that argument since the requested accommodation was not reasonable in the first instance. In this case, while Plaintiff would have been entitled to a job reassignment if a vacant position existed, the position he sought was a civilian position offered to police officers only on a light duty basis. Accordingly, it was not an available assignment for him and the City had no obligation to reclassify the job as a sworn officer position with similar benefits.

There are several lessons to be learned from the Raine decision. First, while it is an appellate court opinion, the California Supreme Court has not spoken authoritatively on the issue. Accordingly, Raine may not be the final say on the issue. Second, it is important to note that Raine could have taken the reassignment to the front desk position as a civilian to the extent it was available to him had he wanted to accept the salary and benefits of that position. Third, each of these cases must rest on its own facts. For example, as the Court noted, if the employer regularly offers assistance to disabled employees by creating new positions, the employer may be required to do so in every instance. Consistency in the case by case determination of an employee’s request for accommodation is critical. It is important that as an employer you seek assistance from your human resource professional or outside counsel when making critical decisions on reasonable accommodation.

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Presented By Attorneys Of

10 a.m. to Noon, Friday, June 30, 2006
Offices of Palmer Kazanjian Wohl Perkins LLP
520 Capitol Mall, Sixth Floor, Sacramento

Who Must Comply All supervisory personnel of California employers with 50 employees or more every two years. New supervisory personnel within six months of assuming supervisory responsibilities. Cost $200 per person or a flat fee of $900 for groups of 5 to 15 from the same company. Special accommodation can be made for groups more than fifteen.

Registration Contact Ruth Svien at (916) 340-2854 or by e-mail at admin@pkh-law.com

Seminars At Your Workplace Palmer Kazanjian can present this training or any of a number of preventive guidance workshops for presentation at your place of business. Contact Ruth at (916) 340-2854 or admin@pkh-law.com for more information.
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The Good, the Bad and the Ugly of the Contractor and Subcontractor Relationship
The relationship between contractor and subcontractors is typically a positive relationship. But there are some occasions where that relationship may result in unexpected liability for a contractor who knowingly or unknowingly hires an unlicensed subcontractor.
Where a contractor hires a properly licensed subcontractor issues regarding indemnification will typically be limited to contract disputes. But where a contractor knowingly or unknowingly hires an unlicensed sub-contractor the contractor may open itself to liability for contributions for taxes, unemployment, disability, and workers’ compensation insurance and workplace injuries.
In Hunt Building Corp. v. Burnick (2000) 79 Cal.App.4th 213, the court held that a general contractor who hired an unlicensed subcontractor was liable for contributions to unemployment insurance, disability insurance, employment training, and withholding taxes if the work that was performed required a contractor license. The court stated that the employer/employee relationship determines who must make contributions to the unemployment and disability funds. (Id. at 219; [citation].) Where an employee performs services for an employer, the employer is required to make contributions and withhold taxes; where an independent contractor performs services for a principal, the principal is not required to withhold taxes or make contributions. (Id.)
Statutory definitions and presumptions determine whether the relationship between a general contractor and a subcontractor is employer/employee or principal/independent contractor. (Id.) Unemployment Insurance Code section 621.5 defines “employee in the context of the contracting business for purposes of determining unemployment insurance coverage: “(a) ‘Employee’ ... means any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who holds a valid state contractor’s license pursuant to [the Contractors’ State License Law]. [ ] (b) When subdivision (a) does not apply, ‘employee’ shall also mean any individual who is an employee, pursuant to Section 2750.5 of the Labor Code, of a person who is required to obtain a valid state contractor’s license pursuant to [the Contractors’ State License Law].” (Id. at 219-220, emphasis added.) Unemployment Insurance Code Section 13004.5 additionally provides an identical definition of employee for purposes of determining whether taxes must be withheld from wages.
Labor Code section 2750.5 sets forth a statutory presumption as to whether a person or entity is an employee or independent contractor. The statute provides: “... a rebuttable presumption affecting the burden of proof that a worker performing services for which a license is required pursuant to [the Contractors’ State License Law], or who is performing such services for a person who is required to obtain such a license is an employee rather than an independent contractor.” (Id., [emphasis added]) After stating three factors for proving independent contract status, the penultimate paragraph of the statute mandates “... any person performing any function or activity for which a license is required pursuant to [the Contractors’ State License Law] shall hold a valid contractors’ license as a condition of having independent contractor status.” (Id., [emphasis added].)
Pursuant to the plain language of Labor Code section 2750.5, an unlicensed subcontractor will be deemed a statutory employee of the general contractor and not an independent contractor. (Id.; citing State Compensation Ins. Fund v. Workers’ Comp. Appeals Bd. (1985) 40 Cal.3d 5, 15.) The court further held that Labor Code section 2750.5 operates to conclusively determine that a general contractor is the employer of not only its unlicensed subcontractors but also those employed by the unlicensed subcontractors. (Id.; [citations].)
The Hunt court looked to previous cases dealing with workers’ compensation liability and affirmed that where a “subcontractor is unlicensed, workers’ compensation liability for the subcontractor’s employees will be imposed on the general contractor as a matter of law.” (Id.; [citations].) In State Compensation Ins. Fund, a rancher hired a contractor to do some remodeling work. The contractor failed to disclose and the rancher failed to ask whether the contractor had a state contractor’s license. (Id. at 8.)
The contractor was severely injured on the job and State Fund, under the rancher’s policy, initially agreed to pay premiums on the contractor’s salary, but ceased making payments and requested repayment asserting that the contractor was an independent contractor and not an employee. (Id.) The court upheld the compensation judge’s decision that “the defense of independent contractor was not available where a worker performing any function or activity for which a contractor’s license was required did not have the requisite license” and therefore, State Fund was liable to provide benefits under the rancher’s policy.” The court further held that the contractor’s failure to disclose his unlicensed status did not estop him from denying his status as an independent contractor.(Id.)
Similarly, the Hunt court held, a general contractor is liable to EDD for unpaid contributions and withholding taxes, as well as workers’ compensation coverage and work place injuries, for its unlicensed subcontractor and its employees. (Id.; [citations].) It is no defense that a subcontractor provided a false contractor license number. Therefore, if you are hiring contractor to perform services and a state contractor’s license is required, a simple search on the Contractors State Licensing Board website, www.cslb.ca.gov, will confirm whether or not the contractor is properly licensed. This simple search may save you hundreds, if not thousands of dollars, in insurance and tax liability.
Contractors are not without recourse against unlicensed contractors. California Business and Professions Code §7031 (b) creates a direct cause of action authorizing any person who paid money to an unlicensed contractor to sue to recover that money. Specifically, the statute states that “[a] person who utilizes the services of an unlicensed contractor may bring an action in any court of competent jurisdiction in this state to recover all compensation paid to the contractor for performance of any act or contract.”
What section 7031 provides is that contractors who perform work without the appropriate license may be required to pay back any and all compensation received while unlicensed. An owner in California who pays for work performed by an unlicensed contractor can sue that contractor for return of all money paid regardless of how well the work was performed. Note that this right to disgorgement includes all compensation paid to the contractor and not just profits. This means that the contractor would have to repay the entire contract price, including amounts already paid to subcontractors and materialmen.

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Unionized Employers In Construction, Drilling, Logging and Mining Industries May Not Be Exempt From Meal Period Requirements, and May Need to Revise Their Collective Bargaining Agreements
A California Court of Appeal out of Los Angeles recently issued an important decision that will require employers in the above-mentioned industries to review, and possibly revise, their meal period policies and collective bargaining agreements (hereafter “CBAS”). In Bearden v. U.S. Borax, Inc., the Court held that the meal period exemption in Wage Order 16 for employees covered by qualifying CBAS was invalid. This means that, at least according to the Court of Appeal, unionized employers in these industries must strictly comply with the statutory meal period requirements, and can no longer claim the collective bargaining exemption.
The Court also held that the employees were not required to arbitrate their meal period claims and could maintain a civil action against the employer, where the arbitration provision in the CBA did not specifically include disputes relating to meal periods. As a result of this decision, employers should revisit the arbitration and grievance provisions in their CBAS to ensure that they specifically and expressly refer to claims under the Labor Code, including those for meal and rest period violations. The plaintiffs in Bearden were employees of U.S Borax, Inc. (Borax) at its open pit mine operations in Boron, California. They alleged that they were required to work 12.5 consecutive hours for each shift, but were given only one 30-minute meal break per shift. They sued Borax for, among other things, denial of rest periods and meal periods mandated by Labor Code Sections 226.7 and 512, subdivision (a), and by IWC Order No. 16-2001 regulating wages, hours and working conditions for certain on-site occupations in the construction, drilling, logging and mining industries.
Borax argued: i) that the meal period exception in the Wage Order (hereafter “Order”) relieved it of the obligation to provide a second meal period; ii) that the Order does not apply to plaintiffs because their employment is governed by a CBA; and iii) alternatively, that under the terms of the CBA, plaintiffs claims must be arbitrated.
A brief background on the exemption in Wage Order 16 is helpful. Wage Order 16-2001 was adopted by the Industrial Welfare Commission (“IWC”) effective January 1, 2001. (Cal. Code of Regs., tit. 8, § 11160.) Section 10 of the Wage Order governs meal periods. Subdivisions (A) and (B) of Section 10 track the language of Labor Code Section 512, subdivision (a), which governs meal periods:

(A) No employer shall employ any person for a work period of more than five (5) hours without a meal period of not less than 30 minutes, except that when a work period of not more than six (6) hours will complete the day’s work the meal period may be waived by mutual consent of employer andemployee. (See Labor Code Section 512.) [¶] (B) An employer may not employ an employee for a work period of more than ten (10) hours per day without providing the employee with a second meal period of not less than 30 minutes, except that if the total hours worked is no more than 12 hours, the second meal period may be waived by mutual consent of employer and employee only if the first meal period was not waived. (See Labor Code Section 512.)”
“ Labor Code Section 226.7 provides a penalty of one additional hour of pay at the employee’s regular rate of compensation for each work day that the meal or rest period is not provided.
Borax relied on section 10(E) of the Wage Order in arguing to the Court that its employees were exempt from the second meal period requirement, which provides:

“Collective Bargaining Agreements. Subsections (A), (B), and (D) of Section 10, Meal Periods, shall not apply to any employee covered by a valid collective bargaining agreement if the agreement expressly provides for the wages, hours of work, and working conditions of the employees, and if the agreement provides premium wage rates for all overtime hours worked and a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.”In order to qualify for the exemption, an employer must show: i) that the CBA expressly provides for the wages, hours of work, and working conditions of the employees; ii) the CBA provides premium wage rates for all overtime hours worked; and iii) the CBA provides a regular hourly rate of pay for those employees of not less than 30 percent more than the state minimum wage.“
Plaintiffs argued that the exemption was invalid because it creates an additional exemption beyond the exemptions expressly included in Labor Code Section 512, and the Court agreed. The Court reasoned that the legislature had not authorized the IWC to enact wage orders inconsistent with the language of Labor Code Section 512.
Borax then argued that the plaintiffs must pursue their meal period claims through arbitration under the CBA. It relied on section 10(F) of the Wage Order, which states:
“If an employer fails to provide an employee a meal period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the meal period is not provided. In cases where a valid collective bargaining agreement provides [a] final and binding mechanism for resolving disputes regarding enforcement of the meal period provisions, the collective bargaining agreement will prevail.”
Borax’s CBA very generally set out a grievance and arbitration procedure. A grievance was defined as “any dispute between the Company . . . and the Union or any member of the bargaining unit, or both, . . . over the interpretation or application of the terms of the [collective bargaining] Agreement.” The Court determined that this language was insufficient to require the plaintiffs to arbitrate their claims because it did not provide a “final and binding mechanism” for resolving disputes over the meal period requirements. The grievance procedure only applied to disputes regarding the CBA itself, and while it addressed overtime, holiday pay, vacation, sick leave, and benefit eligibility, vesting and accrual, it was silent regarding meal period for workers on 12-hour shifts. The CBA did not contain any provision in which the plaintiffs agreed to arbitrate all claims of a Labor Code violation, or a category of claims that includes a departure from the meal break provision of section 512.
As a result of this decision, unionized employers in these industries face exposure for failing to strictly comply with the statutory meal period requirements. Employers in these industries should review the arbitration and grievance procedures in their CBAS to determine whether, and to what extent, they address meal periods and arbitration of claims under the Labor Code.To the extent the CBA does not specifically address Labor Code violations and meal periods in the context of arbitration or otherwise, the employer may face exposure in a civil lawsuit. Employers seeking to reap the benefits of arbitration should have CBAS that expressly and specifically address meal periods in the context of arbitration.

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