November 2017

New Law Expands the Labor Commissioner’s Authority

By Yousaf Jafri

Lincoln, Gustafson & Cercos, LLP

Any new litigator soon learns that litigation may not be the best course of action for each client.  In the field of employment law, employees have the option of requesting an investigation from a state agency, the California Labor Commissioner, otherwise known as the Division of Labor Standards and Enforcement (DLSE), to investigate labor code violations. The DLSE oversees and enforces California’s Labor Code. Specifically, the Labor Commissioner inspects workplaces for wage and hour violations, adjudicates wage claims, and investigates retaliation complaints. Working with the DLSE may help an employee and employer reach a quicker resolution without the expense of litigation — or give you a head start on discovery and understanding your case, should litigation be in your client’s best interest. A new law now allows the DLSE to expand their investigation, which may hand employees additional causes of action to bring or give employers additional issues to defend.

Existing law requires a discrimination complaint investigator to investigate, and submit a report on, each complaint to the Labor Commissioner. The Labor Commissioner may hold an investigative hearing regarding the report if, after reviewing the report, it determines a hearing is necessary.

SB 306 Gives New Powers to the Labor Commissioner and Whistleblowers Seeking Protection

On October 3, 2017, Governor Jerry Brown vastly expanded the Labor Commissioner’s power by approving Senate Bill 306 (S.B. 306).

S.B. 306 now authorizes the Labor Commissioner to investigate an employer when it merely “suspects” retaliation or discrimination “during the course of adjudicating a wage claim, or during a field inspection pursuant to Section 90.5, or in instances of suspected immigration-related threats” — all without an employee filing a complaint for retaliation. (See Cal. Lab. Code § 98.7(a)(2).)

The new law also allows the Labor Commissioner to seek injunctive relief (prohibiting an employer from terminating an employee, or requiring the employee be reinstated, pending resolution of a claim) before the Labor Commissioner has completed an investigation that retaliation in fact exists. Previously, the law granted the Labor Commissioner authority to seek injunctive relief after it had investigated a claim of retaliation and decided a violation exists. Now, a court is required to order injunctive relief on the Labor Commissioner’s showing that “reasonable cause exists to believe that an employee has been discharged or subject to adverse action for raising a claim of retaliation or asserting rights under any law under the jurisdiction of the Labor Commissioner.” (Cal. Lab. Code § 97.4(b)(2)(A)(emphasis added).)

S.B. 306 therefore alters how a temporary restraining order is obtained in such circumstances. Generally, an applicant must establish irreparable harm and a likelihood of success on the merits of a claim; under S.B. 306, the Labor Commissioner does not have to establish either. Rather, the Labor Commissioner must simply show that “reasonable cause” exists to believe a violation has occurred — not that a violation has, in fact occurred for the court to grant injunctive relief. This essentially allows the Labor Commissioner to obtain injunctive relief based upon an allegation of retaliation.

The law also authorizes an employee bringing a civil action under California’s Whistleblower Statute (“section 1102.5”) to seek injunctive relief where there is “reasonable cause” to believe a violation of section 1102.5 has occurred. (See Cal. Lab. Code § 1102.62 et seq.) This would cover, for example, a situation where a worker notices they were not paid for all hours worked, tells their manager about it, and subsequently has their hours cut. With the passing of S.B. 306, an employee seeking injunctive relief is now held to the same lower standard as the Labor Commissioner simply that reasonable cause exists to believe a violation has occurred.

Once Injunctive Relief is Granted

Once an order from a court is obtained, refusing to comply is costly: employers can be subject to penalties of up to $20,000 (Cal. Lab. Code § 97.4(c)(3)), and if the Labor Commissioner prevails, an employer is liable for the Labor Commissioner’s attorney’s fees. (Cal. Lab. Code § 97.4(c)(2).)

Where an employer is prohibited by the court from taking any action against the employee, or is ordered to reinstate or rehire the employee, several questions arise: What happens if, after the order is issued, an employee violates employer policies? Or if the employee commits sexual harassment? Or, if the employee simply falls below performance standards? Without further instruction from the court, it is difficult to predict. However, nothing in the new law comments on the employer’s ability take disciplinary action up to and including termination once the DLSE initiates an investigation. Therefore, an employer should err on the side of caution and not change an employee’s status until the investigation is completed.

Conclusions

While the Labor Commissioner’s power and an employee seeking protections against violations of Section 1102.5 has been greatly expanded in that the bar has been lowered for them to seek injunctive relief, the Labor Commissioner and employee still must provide some sufficient showing to establish “reasonable cause,” and will therefore present evidence that can be rebutted where an employer is prepared. This provides some protection; however, advanced planning and a timely response is crucial to avoiding any further exposure.  Administrative proceedings may help reach an early resolution, but now may also open new twists to cases that all lawyers should be prepared to address.