Are electronic signatures valid in the employment setting?

Generally, yes, and surprisingly this is one area that legislation is well ahead of the general adoption of the technical capabilities available in the marketplace. For example, in 1999 the California Legislature enacted the Uniform Electronic Transactions Act (the “UETA”), Civ. Code, §§ 1633.1 et seq., which provides that when a law requires a record to be in writing or requires a signature, an electronic record or signature satisfies the law. The law requires that any contract entered into between two parties may not be denied legal enforceability simply because of the use of an electronic signature. In 2000, the U.S. Congress passed the Electronic Signatures in Global and National Commerce Act (“ESIGN”), 15 U.S.C. § 7001 et seq., which provides for the enforceability of electronic signatures on the federal level. In addition, most states have also passed their version of the UETA. Taken together, these laws provide authority that electronic signatures are legally binding, just as if the contract was signed in the traditional “wet” manner.

The enforceability of electronic signatures in the employment context was confirmed in recently by a California Federal District Court in Chau v. EMC Corp. (2014). In Chau, the plaintiff sued EMC alleging she was discriminated against because of her pregnancy. The company made a motion to compel arbitration. The plaintiff opposed defendant’s motion to compel arbitration on various grounds, but in particular argued that the arbitration agreement was never signed by the plaintiff. The court rejected plaintiff’s argument, and upheld the electronic signature in this case:

Defendants have also established that Chau signed the Key Employee Agreement, including accepting the arbitration provision. [citations omitted] Chau agreed that “an electronic signature by me (checking Yes) is valid as if I had signed the documents referred to below by hand.” See also Cal. Civ.Code § 1633.2(h) (defining “electronic signature” to include a process [i.e. checking Yes] executed by a person with the intent to sign the electronic record). Accordingly, defendants have established that a valid, signed, arbitration agreement exists between plaintiff and defendants. Neither party disputes that the agreement encompasses the issues in this case.

For the electronic signature to be binding, the ESIGN and UETA require that the signer of the agreement must have intended to sign the agreement, and that the parties consented to complete the agreement electronically. However, as the court in EMC recognized, the laws do not require a traditional signature, but rather “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” Therefore, someone can electronically sign a document by checking a box indicating that they are “signing” the document as was done in the EMC case.

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Interviewed for KTLA news story about employers' use of social media in the workplace

I was interviewed for a news story that aired on KTLA here in Los Angeles about employer’s use of social media in evaluating applicants and employees. I’ve been writing and speaking about this topic for at least five years now, but given the pervasiveness of social media, the topic is only becoming more relevant with the increased use of social media today.

 Employers need to remember to keep a few items in mind regarding social media and the workplace. California passed a law, Labor Code section 980, effective January 1, 2013 that prohibits employers from “requiring or requesting” employees and applicants to provide their passwords to social media accounts. Can California employers monitor employees' internet usage under new Labor Code section 980?

Also, employers need to be aware of employee’s privacy rights. Can employers use employee's posts to social media as basis for employment decisions or would this violate an employee's right to privacy?

Finally, when a company encourages employees to use social media for work, there are some considerations the employer should take into account regarding the ownership of the social media accounts.

Generally speaking, employers may utilize social networking sites to conduct background checks on employees if:

  1. The employer and/or its agents conduct the background check themselves;
  2. The site is readily accessible to the public;
  3. The employer does not need to create a false alias to access the site;
  4. The employer does not have to provide any false information to gain access to the site; and
  5. The employer does not use the information learned from the site in a discriminatory manner or otherwise prohibited by law.
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Are on-duty meal periods valid in California?

As many California employers know, ignoring or failing to comply with the requirements of providing meal and rest breaks in California can create huge liability for companies. California law does allow for “on-duty” meal periods, whereby the employee takes a meal break, but while still working. Employers sometimes view this exception as an easy alternative to having employees clock out and leave the company’s premises for meal breaks. However, the on-duty meal break exception has been interpreted to apply only in a very limited set of circumstances, and needs to be carefully examined before implementing in a workplace.

Pursuant to Labor Code section 226.7 and the Wage Orders (for example Wage Order 4-2001, section 11(b)), each failure to provide the specified meal period entitles the employee to receive an additional compensation premium equal to one hour of pay.

The Wage Order provides for an “on duty” meal period that is an exception to the required meal break if the following requirements are met:

An "on duty" meal period shall be permitted only when the nature of the work prevents an employee from being relieved of all duty and when by written agreement between the parties an on-the-job paid meal period is agreed to. The written agreement shall state that the employee may, in writing, revoke the agreement at any time.

Wage Order No. 4-2001(a)(emphasis added). Unfortunately, the definition of the “nature of the work” is not clear, and the only real guidance California employers have on this issue is a Department of Labor Standards Enforcement (“DLSE”) opinion letter. Click here to download the opinion letter.

In the opinion letter, the DLSE addressed the issue of whether a shift manager in a fast food restaurant working the night shift would be allowed to take a “on duty” meal period. The DLSE began its analysis in stating that the off duty meal period is the default requirement, and any exceptions to this requirement should be narrowly construed.

The DLSE set forth factors it considered in determining whether the nature of the work prevents the employee from taking an off-duty meal period. The factors included:

  • the type of work
  • the availability of other employees to relieve the employee during a meal period
  • the potential consequences to the employer if the employee is relieved of all duty
  • the ability of the employer to anticipate and minimize these staffing issues such as by scheduling employees in a manner that would allow the employee to take an off-duty meal break and
  • whether the “work product or process” would be destroyed or damaged if the employee were given an off-duty meal period.

The DLSE concluded that based on the facts presented in the situation of the fast food restaurant, the nature of the work in the restaurant should not prevent the shift manager from being relieved of all duties for 30 minutes, and therefore the on-duty meal period would not be valid in this context.
In the class action setting, the issue of on-duty meal breaks has resulted in varying opinions. For example, the Ninth Circuit appellate court in Abdullah v. U.S. Security Associates, Inc. upheld the lower court’s granting of class certification on whether a security guard company’s use of on-duty meal period agreements was valid. Alternatively, a California appellate court, in Faulkinbury v. Boyd & Associates, Inc., upheld the denial of class certification for a case also involving on-duty meal period agreements for security guards. Implementing an on-duty meal period agreement in California needs to be approached with caution, and should only be done with assistance from knowledgeable counsel.

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Top Five Items California Employers Need To Know About Tips

1) Who owns a tip?

California law is clear that voluntary tips left for an employee for goods sold or services performed belong to the employee, not the employer. Labor Code section 351 provides, “No Employer or agent shall collect, take or receive any gratuity or a part thereof that is paid, given to, or left for an employee by a patron…. Every gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.”

2) Is employer mandated tip pooling legal?

Yes. In the seminal 1990 case on tip-pooling, Leighton v. Old Heidelberg, Ltd., the court held that an employer’s practice of tip pooling among employees was not prohibited by section 351 because the employer did not “collect, take, or receive” any part of a gratuity left by a patron, and did not credit tips or deduct tip income from employee wages. The court relied upon the “industry practice” that 15% of the gratuity is tipped out to the busboy and 5% to the bartender, which was “a house rule and is with nearly all Restaurants.” However, owners, managers, or supervisors of the business cannot share in the tip pool.

3) When do tip tips left on credit cards have to be paid, and can a deduction made for processing the credit card transaction?

If a patron leaves a tip on their credit card, the employer may not deduct any credit card processing fees from the tip left for the employee. Moreover, tips left using a credit card must be paid to employees no later than the next regular payday following the date the credit card payment was authorized. See Labor Code § 351.

4) Does California allow an employer to credit a portion of the employee’s tips towards minimum wage?

No. While some states provide the employer with a “tip credit”, California law does not allow this. However, with the recent passage of the increase in California’s minimum wage from $8 per hour to $9 per hour on July 1, 2014, and then to $10 per hour on January 1, 2016, there is more discussion of examining whether a tip credit should be considered in California. However, current law does not allow employers to “credit” an employee’s tips towards the minimum wage requirement for each hour worked.

5) Do tips change an employee’s regular rate of pay for overtime calculations?

No. Because tips are voluntarily left by customers to employees, tips do not increase an employee’s regular rate of pay used to calculate overtime rates.

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Can employers use employee's posts to social media as basis for employment decisions or would this violate an employee's right to privacy?

Generally, employees have a privacy expectation in their personnel files, contact information, and work related information. However, this expectation of privacy is not limitless, especially when the employee publically airs his or her work experiences on social media sites for the public to see. Courts have held that employees can waive this right to privacy once they make disclosures in public for everyone else to read via social media networks.

For example, in a case not in the employment context, a California court reviewed the issue of whether an author who posts an article on myspace.com can state a cause of action for invasion of privacy and for intentional infliction of emotional distress against a person who submits that article to a newspaper for republication. The case, Moreno v. Hanford Sentinel, Inc. involved a college student who had moved away from her home town of Coalinga, California. She wrote “An ode to Coalinga” and posted it on her site on MySpace.com. The ode badmouthed her hometown. Six days after publishing it on MySpace, she took the writing off of the site, but the town’s high school principal submitted the writing to the local newspaper for publication. The newspaper republished the ode in the letters to the editor section and listed Moreno’s full name even though she only used her first name on her MySpace page. The ode must have contained some serious dirt on the city, as it resulted in death threats against Moreno’s family, and eventually forced her family to close a 20 year old business and move out of town.

Moreno sued for invasion of her privacy alleging that her post on MySpace was only supposed to be viewed by a few of her friends, and because she removed the post six days after publishing the article. The court rejected Moreno’s theory that the newspaper’s publication violated her right to privacy because her post to MySpace was made virtually to everyone with an Internet connection. The Court reasoned that, “[Moreno’s] affirmative act made her article available to any person with a computer and thus opened it to the public eye. Under these circumstances, no reasonable person would have had an expectation of privacy regarding the published material. As pointed out by appellants, to be a private fact, the expectation of privacy need not be absolute.” Therefore, the court held that “the fact [Moreno] expected a limited audience does not change the above analysis. By posting the article on myspace.com, [Moreno] opened the article to the public at large. Her potential audience was vast.” The court concluded that Moreno therefore could not asserted a cause of action for invasion of her right to privacy against the newspaper.

Even though this case is not involving employment information, a similar analysis would apply to an employee who posts information on social media about workplace issues. Once the employee places the information about his or her work circumstances on social media, this greatly reduces the employee’s privacy in the subject matter. However, an employer should be cautious, and use common sense in responding to such posts. For example, if an employee posts negative information about the company on social media, it would obviously not give the employer a right to disclose the employee’s health information and documents from the employee’s personnel file. Alternatively, if the employee posts about how bad an employer treated him or her, the employer would have the right to publically set the record straight with facts specific to rebut the allegations made by the employee.

Employers should use common sense in responding publically to an employee’s or former employee’s posts on social media and keep any discussions limited to the facts and issues raised by the employee. Furthermore, employers should approach situations with caution when an employee’s posts on social media are password protected and only friends of the employee can view the post. Hacking or gaining access to social media posts under false pretenses is most likely illegal, and would tilt the analysis back into the employee’s favor that the information was not disclosed to everyone and, therefore, would be considered private. In addition, employers may never retaliate against employees for making complaints via the internet or otherwise, and should be careful in making employment decisions based on employees’ complaints about workplace issues even if made on the Internet.

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What other legal issues arise from an increase in California's minimum wage?

With Governor Brown's signing of the bill raising California's minimum wage to $10.00 per hour by January 2016, there are a few new considerations this triggers for California employers.  This quick video discusses the increase in guaranteed salary employers must pay in order to for employees to qualify as exempt. 

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Now Tougher For Employers To Recover Attorney's Fees In Wage Cases

Yesterday, Governor Brown signed into law SB 462 which amends Labor Code section 218.5 to only allow employers to recover their attorney’s fees and costs upon a finding by the court that the employee brought the claim in bad faith. This Labor Code section applies to actions for nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions.

Prior to this amendment, Labor Code section 218.5 permitted the employee or the employer to recover their attorney’s fees and costs if they prevailed in the underlying action – and there was no need for the employer to make this harder showing that the employee brought the case in bad faith in order to recover its fees and costs. This amendment now makes it harder for employers to recover attorney’s fees and costs upon prevailing in a case involving unpaid wages.

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Court upholds company's classification of worker as an independent contractor in Beaumont-Jacques v. Farmers Group

The new decision in Beaumont-Jacques v. Farmers Group examines the test in determining a worker’s independent contractor status. In applying the “economic realities” test set forth by the California Supreme Court in S.G. Borello & Sons, Inc. v. Dept. of Industrial Relations, the Court focused on whether the worker had “meaningful discretion with reference to her efforts” in making the determination about whether her classification as an independent contractor was proper.

Case Facts
In this case, Plaintiff had an agreement with the company that set forth both parties understood and agreed Plaintiff would be working as an independent contractor. The agreement required Plaintiff to conform to the company’s regulations, operations, and certain standards. The agreement provided that either party could terminate the relationship at-will. Moreover, Plaintiff had “meaningful discretion” by recruiting agents and training them to work for the company. She would determine her own hours, vacation schedule, supervising her own staff, remitting payroll taxes for her own staff, paying her own expenses such as office lease, marketing costs and telephones. She also deducted these costs as a business expense in her personal tax returns and identified herself as self-employed in the returns.

Court’s Analysis
The court stated that the “pivotal inquiry looks at the ‘control of details’ – i.e., whether the [company] has ‘the right to control the manner and means of accomplishing the result desired.” As the court noted, however, this does not mean that once the company requires certain standards from the worker that this would automatically make the worker an employee:

The California Supreme Court has declared that “the owner may retain a broad general power of supervision and control as to the results of the work so as to insure satisfactory performance of the independent contract—including the right to inspect [citation], the right to make suggestions or recommendations as to details of the work [citation], the right to prescribe alterations or deviations in the work [citation]—without changing the relationship from that of owner and independent contractor . . . .” (McDonald v. Shell Oil Co. (1955) 44 Cal.2d 785, 790 (McDonald).)

The court explained that the key issue is that the company has the right to “oversee the results, but not the mean, of the work in question” in order for the independent contractor status to be upheld.

Applying this test in this case, the court held that Plaintiff was properly classified as an independent contractor because the Defendant did not control “to any meaningful degree the means by which [Plaintiff] performed and accomplished her duties” even though Plaintiff had to attend meeting with the company and was held accountable to reach very specific objectives. Finally, the court held that the fact that the agreement at issue here which allowed both parties to terminate the relationship upon 30-days’ notice did not support Plaintiff’s assertion she was an employee. Because the relationship could be terminated by either Plaintiff or the company, the court did not provide this issue any weight.

However, even though the court found that the Plaintiff in this case was properly classified as an independent contractor, employers should be careful in making independent contractor classifications. The relatively new Labor Code provisions adopted in 2012 added new penalties for “willful misclassification” of employees as independent contractors which cannot be treated lightly.

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What To Do In Response To Receiving Private Attorneys Generals Act Notice Sent To The Labor and Workforce Development Agency (LWDA)

The Private Attorneys General Act (PAGA) is a Labor Code provision that permits aggrieved employees to recover civil penalties that are only recoverable by the California Labor and Workforce Development Agency (LWDA) and the Labor Commissioner. PAGA expands the scope of penalties available through wage and hour lawsuits.  PAGA is sometimes referred to as the “bounty-hunter law” because it allows a plaintiff to recover these civil penalties that were only recoverable by the Labor Commissioner, but it requires that the plaintiff provide 75% of the civil penalties recovered to the LWDA and the remaining 25% to the aggrieved employees.

However, as a result of frivolous lawsuits under PAGA, the legislature amended the law in 2004 to require plaintiffs to exhaust administrative remedies prior to commencement of a civil action under PAGA. Therefore, in order to exhaust the administrative remedies, a plaintiff must send a letter via certified mail to the LWDA and the employer listing the specific Labor Code violations, including the facts and theories to support the alleged violations. Then the LWDA may then send a letter back to the plaintiff informing them that it will or will not be pursuing the case. If the LWDA responds that it will not pursue the case, or simply does not respond within 30 days, the plaintiff may then proceed with a civil lawsuit to collect PAGA penalties.

Because the plaintiff must send this notice to the LWDA and the employer, the employer receives some advance notice about a potential lawsuit. And if the notice is properly drafted by the plaintiff, the employer should be able to understand the plaintiff’s legal theories and alleged violations. It is also important the employer contact employment counsel as soon as receiving a PAGA letter to the LWDA. This is because the employer has a short time period (33 days) to “cure” any alleged violations. The employer can correct any alleged violations, and provide written notice to the plaintiff and the LWDA describing the actions taken and that the plaintiff cannot recover PAGA penalties. It is critical that the employer review whether or not it should utilize this safe harbor cure provision to prevent plaintiff from recovering PAGA penalties with counsel. Quick action by the employer could preclude plaintiffs from being able to recover PAGA penalties before the lawsuit even begins.

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7 Items A Company Needs To Do After Being Sued In A Wage And Hour Class Action

Being named as a defendant in a class action lawsuit can be overwhelming, especially for a quickly growing company. However, with planning, a company can minimize the impact of the litigation on its existing operations and put forth the best defense. Here are seven items a company can do as part of this planning process when it is first notified of an existing lawsuit.

1. Contact employment counsel.
A lawyer who has experience in employment law and class actions should be contacted as soon as possible. There are certain deadlines that begin to run when a lawsuit is filed, and any delay could adversely affect the company’s defense. If the company does not know of an employment lawyer, a good start is to reach out to trusted advisors for recommendations, such as the company’s corporate lawyer or accountant. Wage and hour litigation, especially in California, is very unique and it is recommended that the company utilize a lawyer that has experience in this area.

2. Review allegations with counsel to see if the safe harbor provision of the Private Attorney General Act (PAGA) could apply.
With the advice of counsel, there should be a review of the allegations in the complaint, and if the Plaintiff is seeking damages under PAGA, the PAGA notice sent to the Labor Workforce & Development Agency (“LWDA”). PAGA provides the employer a short window of time (33 days from receiving the PAGA notice) to “cure” any alleged violations. If the employer cures the problems within the time period, the Plaintiff cannot recover penalties under PAGA. Whether or not any items need to be cured, and the process for utilizing this safe harbor should be reviewed closely with counsel.

3. Gather time records and personnel files for the Plaintiff.
The personnel file for the named Plaintiff will have to be produced early in the case. In addition, the information in the personnel file will (hopefully) document any performance issues or other possible defenses the company has to the Plaintiff’s allegations. Also, if the company has implemented an arbitration agreement, it will be important to determine if the Plaintiff has signed it and whether or not there is an argument that in signing the agreement the Plaintiff cannot bring a class action.

4. Begin constructing a list of all employees who have worked in similar positions as the Plaintiff during the last four years (which is likely the statute of limitations).
In California, the statute of limitations for most wage and hour class actions is four years from the date the complaint is filed. Therefore, the employees who have worked in the same or similar positions as the Plaintiff will likely be the group of employees the Plaintiff is seeking to represent in the class action. It is important to know how many of these employees there are. For example, if there are too few this could be a defense to class certification.

5. Gather employee handbooks and policies that were in effect during the last four years.
The litigation will likely revolve around what policies the company had in place, and whether the policies were legally compliant. The company’s counsel will have to review these policies and handbooks. It is also likely that the company will have to produce these early in the litigation as well.

6. Review any applicable insurance policies.
The company should review all insurance policies it has to see if any of them could potentially cover the litigation. Most employment practices liability insurance (“EPLI”) policies exclude class action lawsuits from coverage, but there may be coverage for defense costs, or there may be something unique about the litigation facing the company that triggers coverage. It is also important to assess whether the lawsuit needs to be tendered to the insurance company.

7. Develop a plan about how to communicate the existence of the class action with current employees.
Word usually starts to spread quickly among the employees about the existence of the lawsuit. The company, with advice from counsel, should determine whether it wants to be proactive about communicating with the employees about the lawsuit, as well as what can and cannot be said to employees. At the minimum, a person within the company should be designated to handle any questions about the lawsuit. This will ensure a consistent message is used.

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