California Employment Law Report

California Employment Law Report

The latest litigation trends, court decisions, & issues on California Employment Law

Friday’s Five: California employers get some PAGA relief

California passed a new law in October 2015 that provides employers some potential protection against penalties imposed by the Private Attorney General Act of 2004 (PAGA). Employers need to understand the intricacies of PAGA, and the importance of seeking legal counsel immediately upon receiving a copy of the letter a plaintiff must send to the Labor and Workforce Development Agency (LWDA). Today’s Friday’s Five provides five highlights to assist in this understanding, and what potential relief employers are provided under the amendment of the law:

1. PAGA authorizes individuals to collect penalties only previously obtainable by the state’s LWDA.

PAGA (sometimes referred to as the bounty hunter law) was designed by the California Legislature offer financial incentives to private individuals to enforce state labor laws. As the Court noted in its opinion, at the time the legislation passed, the state’s labor law enforcement agencies did not have enough resources or staffing necessary to keep up with the rapid growth of California’s workforce. Therefore, PAGA allows aggrieved employees to act like a private attorney general in collecting civil penalties for Labor Code violations. The employee must give 75% of the collected penalties to the Labor and Workforce Development Agency, and the remaining 25% is to be distributed among the employees affected by the violations.

2. PAGA claims are representative suits, which are very different than class actions.

First, because the plaintiff under PAGA is seeking penalties set out in the statute, a one year statute of limitations applies. This varies drastically from the four year statute of limitations that apply to most wage and hour class actions when a Business and Professions Code section 17200 cause of action is alleged.

Second, the California Supreme Court in Arias v. Superior Court held that a plaintiff does not have to have the class certified as a class action in order to recover damages on behalf of all of the other employees plaintiff seeks to represent.

3. PAGA claims cannot be waived by employees.

The California Supreme Court also clarified that employees may not waive their right to bring a representative action under PAGA (even though the Court held that class action waivers in arbitration agreements are enforceable). The Court held in Iskanian v. CLS Transportation that, “we conclude that an arbitration agreement requiring an employee as a condition of employment to give up the right to bring representative PAGA actions in any forum is contrary to public policy.”

4. Before bringing suit, a plaintiff must notify the state of their intention to file suit to recover PAGA penalties.

Employees seeking recovery under PAGA must comply with requirements that place the Labor and Workforce Development Agency and the employer on notice that the employee will be seeking remedies under the Act and give the Agency a chance to investigate itself. If the Agency does not investigate, then the plaintiff can proceed with the claim. As discussed below, this is important because in October 2015, employers now have the ability to cure problems set forth in the plaintiff’s letter to the LWDA, which could bar the plaintiff from obtaining any penalties.

5. In October 2015, legislation was passed to provide employers an additional right to cure defects in pay stubs, and potentially bar plaintiffs from recovering any penalties.

AB 1506 amended PAGA to allow employers the ability to cure certain violations in order to avoid penalties. The law went into effect as of October 2, 2015. The amendments provide that employers can fix paystubs that do not list the inclusive dates of the period for which the employee is paid (required under Labor Code section 226(a)(6)) and the name and address of the legal entity that is the employer (required under Labor Code section 226(a)(8)). In order to cure the defects, within 33 calendar days of the postmark of the notice to the LWDA by the plaintiff, the employer must give written notice by certified mail to the aggrieved employee or their representative, and the LWDA that the violation has been cured, describe the actions taken, and set out that no civil action pursuant to Section 2699 may commence. The employer must also provide a fully compliant itemized wage statement to each aggrieved employee for each pay period for the three-year period prior to the date of the written notice by the plaintiff. It is vital that employers who receive a PAGA notice seek counsel immediately to potentially cure any defects pursuant to this new legislation, and potentially avoid large PAGA penalties.

California enacts new equal pay protections for 2016

Equal pay act

Today, October 6, 2015, Governor Brown signed into the law Senate Bill 358, directed at ensuring equal pay across genders.  While it was illegal to pay employees different wages based upon their gender or race already under California law, the new law expands the protection to workers who do “substantially similar” work.  The bill amends Labor Code section 1197.5.  If challenged, employers can justify different pay if the employer can show it is based on one or more of the following factors:

  1. A seniority system
  2. A merit system
  3. A system that measures earning by quantity or quality of production
  4. A bona fide factor other than sex, such as education, training, or experience.

The law also requires that employers maintain records of the wages and wage rates, job classifications, and “other terms and conditions of employment of the person employed by the employer” for three years.

The statute of limitations requires that a plaintiff bring a case no later than two years after the cause of action accrues, exempt that if the violation is “willful” a three years statute of limitations applies.

Employees who bring a lawsuit under the law can recover the balance of the wages, including interest thereon, and an equal amount as liquidated damages, costs of the suit and reasonable attorney’s fees, notwithstanding any agreement to work for a lesser wage.

The law also prohibits employers from restricting employees from disclosing their wages, discussing the wages of others, inquiring about another employee’s wages, or aiding or encouraging others to exercise their rights under the new law.  Current law already regulated employer’s ability to limit employee’s discussion of their wages and workplace environment.  For example, employers cannot prohibit employees from discussing or disclosing their wages, or for refusing to agree not to disclose their wages under Labor Code Sections 232(a) and (b). In addition, employers cannot require that an employee refrain from disclosing information about the employer’s working conditions, or require an employee to sign an agreement that restricts the employee from discussing their working conditions under Labor Code Section 232.5.

The new law becomes effective January 1, 2016.  Employers should consider the implications of this new law and how best to preserve evidence that documents and justifies the different rates of pay for employees.

This law, among other laws that California employers must comply with at the beginning of 2016 will be discussed during a webinar I’m conducting next month.  For more information about the webinar and to register, please email me.

Five ways companies can best utilize employment attorneys

It may not be a topic on the minds of many business owners, human resource managers, or in-house counsel, but developing an effective relationship and engaging employment law counsel is essential in saving the company money and avoiding litigation. This Friday’s Five is a video in which I discuss five ways companies should be engaging their employment law attorney help minimize risk and avoid litigation.

Please drop me an email if you have any questions or topics you would like me to address in the Friday’s Five.

Can employers obtain e-signatures on Forms I-9 and store them electronically?

With more employers moving to digital personnel files, there is some concern about whether certain documents can be stored electronically or if the original document is necessary.  Generally, with the passage of the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) by most states, e-signatures are given the same force and validity as traditional “wet” signatures.

Given the strict rules employers must comply with in completing and maintaining the Forms I-9 for employees, can employers implement an e-signature solution for the I-9 and can the I-9 be stored electronically?

The U.S. Citizenship and Immigration Services provides that employers can implement electronic signatures on the Form I-9:

Q.  How can I add an electronic signature field to Form I-9?

A.  The Form I-9 posted to the USCIS website does not currently have an electronic signature function and must remain locked to ensure its integrity. Employers who wish to implement an electronic Form I-9 with an electronic signature function may re-create a Form I-9 that includes such a function, as long as the form looks the same and contains all the data elements and language as the Form I-9 posted to the USCIS website. See 8 CFR 274a.2 (a)(2). The electronic Form I-9, which includes any electronic signature function an employer implements, and the system used to generate and store it must comply with regulations found at 8 CFR 274a.2 (e)-(i). See pages 23-26 of the Handbook for Employers: Instructions for Completing Form I-9 for more information.

In addition, employers may store the Forms I-9 electronically if certain requirements are met:

Employers may use a paper system, an electronic system or a combination of paper and electronic systems to store Forms I-9. An electronic storage system must:

Include controls to ensure the integrity, accuracy and reliability of the electronic storage system.

Include controls to detect and prevent the unauthorized or accidental creation of, addition to, alteration of, deletion of or deterioration of an electronically stored Form I-9, including the electronic signature, if used.

Include controls to ensure an audit trail so that any alteration or change to the form since its creation is electronically stored and can be accessed by an appropriate government agency inspecting the forms.

Include an inspection and quality assurance program that regularly evaluates the electronic generation or storage system, and includes periodic checks of electronically stored Forms I-9, including the electronic signature, if used.

Include a detailed index of all data so that any particular record can be accessed immediately.Produce a high degree of legibility and readability when displayed on a video display terminal or reproduced on paper.

Five essential aspects to understand about defamation claims

Employers usually face defamation claims in connection with wrongful termination allegations.  Defamation claims can arise in twoNestor Galina forms: libel (written) and slander (spoken).  Defamation can result from a variety of different scenarios, such as: statements made to others during a workplace investigation, explaining to colleagues the reasons why an employee was terminated, the employee’s claim that the reason for his termination was false, or in connection with job references.  This Friday’s Five helps employers understand what can constitute a claim for defamation, and potential defenses.

1.     Two Types Of Defamation: Libel And Slander

In order to prove a libel or slander claim, the employee must prove: (1) false communication; (2) unprivileged statement of fact (not opinion); (3) it was made about the plaintiff; (4) published to a third party; and (5) caused damage to the plaintiff.

For libel, which is written, the communication must expose plaintiff to “to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.”  See Cal. Civil Code section 45.

To prove slander, which is verbal, the communications must charge plaintiff with a crime, imputes him with an “infectious, contagious, or loathsome disease”, or “impotence or want of chastity”, or tends directly to injure plaintiff in his occupation.  See Cal. Civil Code section 46.

2.     A Plaintiff does not have to prove damages for defamation “per se”

Certain communications eliminate the need for the plaintiff to prove special damages (see below for definition of special damages), and these communications are called defamation per se.  Slander per se are words that “fall within the purview” of Civil Code section 46.  Libel per se is “defamatory of the plaintiff without the necessity of explanatory matter, such as inducement, innuendo or other extrinsic fact…”  Therefore, if the defamatory statement is not apparent on its face and requires an explanation of the surrounding circumstances (the `innuendo’) to clarify the meaning, it is not libelous per se.

For example, statements claiming that a doctor committed extortion, lied under oath, prescribed medications without a license are defamation per se.  See Burrill v. Nair (2013) 217 Cal. App. 4th 357, 384-385.

3.     Publication required

There needs to be publication in order for a statement to constitute defamation.  However, even making the statement to one person can constitute publication.  Usually if the plaintiff makes the publication of the statement herself, it cannot be defamation.  However, if the plaintiff is under a strong compulsion to disclose to others the defamatory statement, this could constitute publication even though the plaintiff makes the statement herself.  This argument arises when the plaintiff alleges that the company provided false and defamatory reasons for a termination, and then when attempting to obtain a new job the plaintiff must disclose the statements to prospective employers during the interview process to explain the past employment situation.

4.     Certain Workplace Communications Are Protected From Defamation Claims

Employers are protected under a qualified privilege when they communicate without malice with a person who has a common interest in the subject matter of the communications.  For example, a court held that an employee’s report of alleged sexual harassment by a co-worker made to a health care provider and the company’s human resources personnel was privileged, and therefore not defamation.  In addition, in some cases courts have held that statements made without malice by the employer to other employees about the reasons for an employee’s termination are privileged because the employer and employees have a common interest in maintaining safe workplaces and job efficiency.  However, employers still need to be very careful in what they communicate to others within the company, and should usually keep the information limited to individuals who have a need to know.

5.     Damages Available To Plaintiffs

Plaintiffs are entitled to recover different damages depending on the type of defamation they have proven as part of their case.  The California Civil Code sets forth the following damages based on the underlying conduct and malice involved in the statements:

(a) “General damages” are damages for loss of reputation, shame, mortification and hurt feelings;

(b) “Special damages” are all damages which plaintiff alleges and proves that he has suffered in respect to his property, business, trade, profession or occupation, including such amounts of money as the plaintiff alleges and proves he has expended as a result of the alleged libel, and no other;

(c) “Exemplary damages” are damages which may in the discretion of the court or jury be recovered in addition to general and special damages for the sake of example and by way of punishing a defendant who has made the publication or broadcast with actual malice.

See Cal. Civil Code section 48(a).

Photo: Nestor Galina

Friday’s Five: Organ donation, accommodation law effective 2016, and tips employers need to know now!

In July 2015, Governor Brown signed legislation designed to overturn the decision in Rope v. Auto-Chlor System of Washington Inc.  The case involved an employee who was asking his employer for an accommodation to take a future leave of absence in order to donate a kidney to his sister.  As discussed below, the case raises many issues that employers should be aware of, especially the new law effective 2016 making requests for accommodations a protected activity.

1.    AB 987 makes a request for reasonable accommodation a protected activity

AB 987 was signed into law by Governor Brown on July 16, 2015, which amends Section 12940 of the Government Code and becomes effective January 1, 2016.  The law was passed to overturn the court’s ruling in Rope v. Auto-Chlor System of Washington Inc.  In the case, Plaintiff Rope alleged he suffered retaliation for engaging in the FEHA “protected activities of requesting leave for his sister’s disability/medical condition.”  FEHA makes it illegal “[f]or any employer … to discharge … or otherwise discriminate against any person because the person has opposed any practices forbidden under this part….” (Gov. Code, § 12940, subd. (h).)

To state a claim of retaliation under FEHA, a plaintiff must show: (1) he engaged in a protected activity, (2) he was subjected to an adverse employment action, and (3) there is a causal link between the protected activity and the adverse employment action.

The issue in the case was whether a request for an accommodation could be a protected activity?  The defendant argued that the plaintiff did not engage in a protected activity because he did not claim to have “`oppose[d] any conduct forbidden'” by FEHA, and the court agreed.  The court held that an employee’s request for paid leave in order to donate one of his kidneys to his sister was not a protected activity.  The court stated:

Nevertheless, we find no support in the regulations or case law for the proposition that a mere request — or even repeated requests — for an accommodation, without more, constitutes a protected activity sufficient to support a claim for retaliation in violation of FEHA. On the contrary, case law and FEHA’s implementing regulations are uniformly premised on the principle that the nature of activities protected by section 12940, subdivision (h) demonstrate some degree of opposition to or protest of the employer’s conduct or practices based on the employee’s reasonable belief that the employer’s action or practice is unlawful.

In response, the legislature passed AB 987 and the Governor signed the bill into law.  The law makes an employee’s request for an accommodation a protected activity for which the employer cannot take any adverse employment actions against the employee because of the request.  AB 987 states:

Notwithstanding any interpretation of this issue in Rope v. Auto-Chlor Sys. of Washington, Inc., (2013) 220 Cal. App. 4th 635, the Legislature intends (1) to make clear that a request for reasonable accommodation on the basis of religion or disability is a protected activity, and (2) by enacting paragraph (2) of subdivision (m) and paragraph (4) of subdivision (l) of Section 12940, to provide protection against retaliation when an individual makes a request for reasonable accommodation under these sections, regardless of whether the request was granted.

2.      Complaints only made internally to employer are not sufficient to state a claim under the whistle blower statute, Labor Code section 1102.5

Plaintiff Rope also alleged that the company violated Labor Code section 1102.5, which prohibits an employer from adopting a policy to prevent an employee from divulging to a government or law enforcement agency information the employee reasonably believes discloses a violation of a state or federal law, retaliating against an employee who reveals such information to a governmental agency, or from retaliating against an employee who refuses to engage in conduct that would result in a violation of a statute.

The court held that the plaintiff did not have a viable whistle blower claim under Labor Code section 1102.5 because he did not report his suspicions of unlawful activity to any governmental agency, or that he refused to violate the law at the request of his employer.  His internal complaint to the company “does not trigger whistle blower protection under Labor Code section 1102.5. (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 77 [§ 1102.5, subd. (b) “does not protect plaintiff, who reported his suspicions directly to his employer”].).”

3.    Donation Protection Act – Requires employers to provide up to 30 days of paid leave for employee who donates an organ

One of the issues in the case  involved the Donation Protection Act (DPA).  The DPA provides that as of January 2011, private employers with 15 or more employees must grant “[a] leave of absence not exceeding 30 days to an employee who is an organ donor in any one-year period, for the purpose of donating his organ to another person.”

4.    Plaintiffs can assert FEHA claims if they are not disabled but are “associated with a person who has or is perceived to” be disabled

FEHA provides that it is unlawful for “an employer, because of the … physical disability … of any person, to … discharge the person from employment … or to discriminate against the person … in terms, conditions, or privileges of employment.” (§ 12940, subd. (a).)  The statute also prohibits discrimination on the basis of physical disability “includes a perception that the person has any of those characteristics or that the person is associated with a person who has, or is perceived to have, any of those characteristics.” (§ 12926, subd. (n)).

To state a FEHA claim, a plaintiff need only “show that: he or she was a member of a protected class; was qualified for the position he sought; suffered an adverse employment action, and there were circumstances suggesting that the employer acted with a discriminatory motive.”

The court reasoned that the plaintiff’s request for leave under the DPA would cause the employer to incur certain expense; and the facts could support a reasonable inference is that the employer acted preemptively to avoid an expense stemming from plaintiff’s association with his physically disabled sister.

5.    Anticipated disability is not covered under FEHA

The court made it clear that in order to state a discrimination claim under FEHA, a plaintiff must be physically disabled, or have a “disease, disorder, condition, or health impairment that might become a ‘physical disability.’”  Given the facts of this case, the court held that the plaintiff could not state a claim for actual or perceived disability discrimination under FEHA:

 Rope has not established that he is himself physically disabled, and does not claim an ability to cure this fatal defect. At most, Rope alleges only that he anticipated becoming disabled for some time after the organ donation. This is insufficient. Rope cannot pursue a cause of action for discrimination under FEHA on the basis of his “actual” physical disability in the absence of factual allegations that he was in fact, physically disabled.

Five YouTube channels every employer/entrepreneur should follow

In this Friday’s Five I wanted to share some resources that have added a lot to my understanding of business, startups, and venture capital.  Two points upfront:

  • The Internet (especially YouTube) has become a huge equalizer for startups and small businesses.  Ten years ago, the information that is shared on the channels listed below was very difficult, if not impossible, to come by.  Now it is available to everyone willing to learn, and don’t write off YouTube as a learning tool.  The first channel I recommend below is the entire semester for a Stanford computer science course.
  • At first blush, it may seem that the channels are focused on tech startups, but the lessons and general business discussions are great for any business owner running any type of company, in any industry.

So here are five YouTube channels I recommend every employer/entrepreneur should follow:

1.     How to start a startup by Stanford school of computer science

Sam Altman, the President of Y Combinator, conducted this class for Stanford’s computer science school.  He brought in some of the preeminent investors and entrepreneurs of Silicon Valley as guest lecturers for the class.  All 20 lecturers are on YouTube, so no need to be a student at Stanford.  I’ve watch all of the lectures, but some of the best ones that are definitely worth the time to watch are:

Lecture 15 – How to manage by Ben Horowitz (I’ve written about this lecture previously here)

Lecture 3 – Before the startup by Paul Graham

 2.     Gary Vaynerchuk

I have to be honest, I did not like Gary Vaynerchuk when I first came across him a few years ago while he was growing his wine business into a $60 million business.  However, his Ask Gary Vee Show has been very insightful for social media marketing.  He has recognized recently that his persona may turn a few people off, but he has taken steps to regulate it a bit more.  However, as he regularly professes, everyone needs to be their true self, and he does not hide who he is.  I have to admit that I thought social media was not for me, or for lawyers for that matter, but as Gary points out that social is part of marketing now, and every business must engage in social.  Another major takeaway I learned from him, it does not hurt to try new social media platforms and learn how they work, there is simply no downside to trying and learning.

3.     Stanford Graduate School of Business

Stanford’s School of Business places great content in shorter segments (less than 10 minutes) on a wide range of business topics.  The videos are produced with regular consistency, and cover a wide range of topics.  Recently, one video discusses Human Resources issues that face a startup – posted below.  Consider this channel your continuing business education.


4.     Foundation by Kevin Rose

Foundation is a series of interviews of entrepreneurs by Kevin in an informal setting.  The first 15 or so interviews are must watches.  For entrepreneurs, it is great to hear the stories of successful entrepreneurs and the struggles they had.  For business owners, the series provides insights into how these individuals started, managed, and grew their businesses.

5.     Bothsides TV – Mark Suster

Mark Suster is a venture capitalist at Upfront Ventures in Pasadena.  He interviews guests about startup issues and investing with a focus on technology.  His blog, Both Sides of The Table is also a good read for anyone interested in venture capital, and the Los Angeles tech scene.

Bonus: California Employment Law Report

Also, I have to add my YouTube channel to the list as well.  If you have any questions or topics you would like to have me cover in a video, please reach out to me on Twitter at @anthonyzaller or email me.

Uber class action certified, five takeaways for California employers

This week, a federal court in northern California certified portions of a class action Picture - driverbrought by Uber drivers who worked in California since 2009 (click here for the decision [PDF]).  Over 160,000 drivers have worked for Uber in California during this time period, and while the case is making a lot of news, what are the key issues employers should understand about the ruling?  Here are five takeaways for employers from the decision:

1.     Employers must understand the class action procedure

Employers with more than 30 or so employees should understand what a class action is, and the procedural issues of a class action.  It is important to understand that while the court certified certain portions of the plaintiffs’ case (and refused to certify others), this does not mean that Uber has lost the case.  Class certification is not a ruling on the merits of the case, but only whether the case is one that there a sufficient similarities between all of the class members’ claims that enable to court to decide the matter on a class wide basis.  The court explained:

The merits of the case are not currently at issue. Rather, the Court needs to consider only two questions at this juncture; whether the case can properly proceed as a class action, and, if so, how. While answering both of those questions necessarily requires the Court to perform a rigorous analysis of a number of legal issues, the parties correctly recognize that one threshold issue is of paramount importance to the success or failure of Plaintiffs’ class certification motion: as to whether drivers are Uber’s employees or independent contractors under California’s common-law test of employment, will “questions of law or fact common to class members predominate over any questions affecting only individual members” of the proposed class?


That is, are the drivers’ working relationships with Uber sufficiently similar so that a jury can resolve the Plaintiffs’ legal claims all at once? This question is of cardinal importance because if the Plaintiffs’ worker classification cannot be adjudicated on a classwide basis, then it necessarily follows that Plaintiffs’ actual substantive claims for expense reimbursement and conversion of gratuities cannot be adjudicated on a classwide basis either.

The court ruled in plaintiffs favor in certifying the class action because Uber treated all of the drivers the same:

As other courts weighing certification of employment misclassification claims have recognized, however, there is inherent tension between this argument and Uber’s position on the merits: on one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that individual issues with respect to each driver’s “unique” relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers’ proper job classification.

Uber also made the argument that the class should not be certified because many drivers did not support the lawsuit, as demonstrated in 400 declarations it offered from the drivers.  The court noted that class member’s opposition to the class action does not necessarily bar class certification.  The court explained that it “must be mindful” of the fact that “‘the protections conferred by [these laws] have a public purpose beyond the private interests of the workers themselves.’”  In addition, the court explained that if class members do not agree with the class action, they are free to opt-out of the class action.

2.     The Borello test determines if workers are properly classified as independent contractors

The “most significant consideration” is the putative employer’s “right to control work details.”  S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations (Borello), 48 Cal. 3d 341, 350 (1989).  Recently, the California Supreme Court noted that under the right-of-control test, it is “not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Ayala, 59 Cal. 4th at 533.

The second set of factors that the court will look at under the Borello test are as follows:

a) whether the one performing services is engaged in a distinct occupation or business;

(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee.

Finally, the Borello test has five additional factors borrowed from the Fair Labor Standards Act (FLSA) in making a determination of a worker’s classification:

(i) the alleged employee’s opportunity for profit or loss depending on his managerial skill;

(j) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;

(k) whether the service rendered requires a special skill;

(l) the degree of permanence of the working relationship; and

(m) whether the service rendered is an integral part of the alleged employer’s business.

The court analyzed these factors and held that a class action was appropriate in this case “because all (or nearly all) of the individual elements of the Borello test themselves raise common questions which will have common answers.”

3.     It is the employer’s burden to prove the workers are independent contractors, so proceed with caution

The court noted that because Uber drivers “’render service to Uber,’ they are presumptively employees as a matter of law.  Thus, the Plaintiffs have proved their prima facie case, although the ultimate question of their employment status will need to be decided by a jury.  Therefore, the burden will be on Uber at trial to ‘disprove an employment relationship.’”

4.     Understand obligations to reimburse employees for work related expenses

The plaintiffs were also seeking to certify a class of drivers who incurred business expenses and were seeking reimbursement for these expenses under Labor Code section 2802.  While plaintiffs were not entirely clear on what items they were seeking reimbursement for, the court concluded that it appeared the main reimbursement items were for vehicle operating expenses, such as gas, maintenance, and wear and tear.  Plaintiffs, therefore, waived reimbursement claims for other items such as water, gum, and mints for passengers, and clothing costs.  I’ve written previously about employer’s obligations to reimburse drivers for mileage here.

The court noted that these reimbursement claims “can sometimes be problematic to certify as class actions because ‘there may be substantial variance as to what kind of expenses were even incurred by [the workers] in the first place” and “it may be challenging to determine on a classwide basis whether a particular expense (or type of expense) was ‘necessary’ or incurred in ‘direct consequence’ of the employee’s duties.”  The court held that it would not certify the reimbursement class at this point in time because the plaintiffs did not demonstrate that by dropping the reimbursement claims in addition to the mileage reimbursement claim was in the best interest of the class.

5.     Businesses need to be careful about how they characterize tips or service charges to customers, and understand the difference

Plaintiffs also assert that because the drivers should have been classified as employees, Uber violated Labor Code section 351, which precludes employers from taking employee’s tips.  The court granted plaintiffs’ motion for class certification on this issue based on Plaintiffs’ evidence that Uber informed its customers in advertisements that a tip for the driver was included in the cost of the fares (“When the ride is over, Uber will automatically charge your credit card on file.  No cash is necessary.  Please thank your driver, but tip is already included”; “All Uber fares include the tip….”)  Employers must be mindful about how they characterize tips and service charges, and must understand the difference between the two under the law.

Nominated for 2015 Best Legal Blog – Now I need your vote

If you have been a reader of this blog, I’m calling in a favor.  The California Employment Law Report has been nominated for the Expert Institute’s Best Legal Blog Contest (out of more than 2,000 blogs, 250 were selected for this).

So if you have found any value from my blog, please click on the banner above, or visit this page and click on the ‘thumbs up’ button to register your vote (I promise it will take less than 10 seconds):

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What are the biggest threats facing restaurateurs in 2015 and beyond?

I was able to catch up with California Restaurant Association’s CEO, Jot Condie at the 2015 Western Foodservice & Hospitality Expo.  We discuss the threats facing restaurateurs and the steps the CRA is taking to represent its members.