California Employment Law Report

California Employment Law Report

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

Five action items employers can take pending the DOL changes in exempt classifications

DOL

In 2015 the Department of Labor (DOL) proposed increasing the salary employees must receive in order to be classified as exempt.  The DOL finalized the rules and the changes are pending before the White House’s Office of Management and Budget.  If approved, it is likely that the final rules would take effect late summer or early fall of 2016.  Here are five action items employers should take now in order to comply with the pending DOL regulations:

1.     Understand how California differs from Federal regulations in regards to the exempt status of employees.

It is very dangerous for an employer to read a few legal updates from lawyers and a few articles from the internet and assume that they have a full understanding the requirements and the analysis that goes into properly classifying employees as exempt or non-exempt.  At risk of sounding like a lawyer, it is a very detailed analysis, and California’s requirements differ from the Federal requirements in many ways.  Therefore, it is imperative that employers understand which laws apply to their employees, and that they are following the correct laws.  The set of rules that provides the employee with more rights is usually the law that governs the particular situation.  As an example, California law sets forth requirements specific for an employee to qualify as a computer professional, while Federal law does not have a separate set of rules for this position.

2.     Take time to evaluate workforce and make any reclassifications when new regulations are issued. 

Employers should use the DOL’s change in regulations as an opportunity to audit their workforce to determine if there are some employee classifications that should be changed.  It would be an ideal time when the DOL’s regulations take effect to reclassify employees as nonexempt without raising the question of why is the reclassification taking place.

3.     Update timekeeping system and policies.

If the DOL regulations are implemented as drafted, it would significantly raise the level of pay required to meet the white collar exemption to $50,440 salary per year in 2016.  Currently, California employers must pay the higher amount of twice the state minimum wage for employees to meet one of the white collar exemptions.  As of April 2016, the state minimum wage is $10 per hour, and therefore employers must pay an annual salary of $41,600 for an employee to meet the salary basis test for a white collar exemption.  The increase in the salary level proposed by the DOL will likely result in many employers reclassifying employees as nonexempt.  Therefore, with more employees needing to clock in an out for the start and stop times (in addition to tracking the start and stop times for meal breaks as required under California law), employers need to ensure their timekeeping system is up-to-date and compatible with their workforce.

4.     Ensure the company’s policy prohibiting off the clock work is effective and enforced in addition to policies designed to limit the amount of overtime worked. 

If reclassifying employees as nonexempt as a result of the DOL regulations, employers need to ensure they take steps to protect themselves off-the-clock work claims.  Employers should have an effective timekeeping policy and train their managers about how prevent off-the-clock work.  In addition, employers need to develop and train managers on the correct policies to control unauthorized overtime worked.  Managing overtime costs requires effective policies and training of managers to ensure all wage and hour laws are complied with.

5.     Keep current on when the DOL rules go into place. 

Employers should not analyze employee exemption issues now and delay taking any action until later this summer.  It is likely that the DOL regulations will take effect soon, and employers cannot get caught in not updating and reclassifying employees once the relations are implemented.  Now is the time to start the analysis.  In the unlikely chance that the DOL regulations are not implemented, employers can chalk up the work done as a wage and hour audit to ensure compliance with the current obligations.

The Restaurant Advisory Group Seminar presents ‘The Lease’

I’m a member of the Restaurant Advisory Group (TRAG) which focuses on advising restaurants on a variety of business and legal issues.  On May 5, 2016 the group is offering a presentation on leases: Understanding What you are Signing in A Lease – The Good, The Bad, The Ugly Clauses, Tenant and Landlord Perspective.  The event is from 9 a.m. to 11 a.m. at the Petroleum Club in Long Beach.

The agenda for the event:

The lease is one of the most important assets of your business. Hence, we will be addressing various problematic clauses and solutions.  We start with an example of a letter of intent (LOI)/Proposal to lease, and will discuss the following:

  • Letter of Intent/Proposal to Lease.
  • Clauses to be addressed;
    • Assignment and Sublease Clause including options – pros and cons,
    • Personal guarantee
    • Assignor of lease – legal responsibilities
    • Options are personal and non-transferable
    • What is fair market rent at time of exercising option
    • Can not unreasonably be withheld – terminology
  • Percentage clauses,
    • Fixed rate vs CPI increase
    • How to avoid % clause
    • Property sold – how does it impact tenant and how to handle
  • Use clause,
    • Permitted or exclusive use
  • Operation clause –
    • Hours of operation
    • Parking
    • Abatement of rent when lead tenant vacates Center
  • Association/Merchant fees

There is no charge for readers of the Employment Law Report to attend.  You can register here.  Please contact me if you have any questions, and hope you can join us.

Five employment law developments in California

A lot was happening this week in California’s employment law.  This week’s Friday’s Five is a round-up on the highlights:

1.       Los Angeles City Council votes to require employers to provide 6 days of paid sick leave.

The LA City Council approved a measure to require employers to provide employees up to six paid sick days per year.  This is double the requirement under California state law that went into effect July 1, 2015.  It is likely that the law will go into effect July 2016.  The rules do not apply to small businesses with 25 employees or less until July 2017.  The law still must be drafted by the city attorneys.

2.       Uber settles class action cases for $100 million.

The settlement was reached this week by Uber to settle two class actions, one pending in California and the other in Massachusetts.  The class actions alleged that Uber improperly classified drivers as independent contractors rather than employees, and was seeking damages resulting from the misclassification.  The settlement provides $84 million to be distributed to the drivers “in California and Massachusetts who have used the Uber App at any time since August 16, 2009” until the court approves the settlement agreement.  The settlement resolves these cases, but Uber will likely have to continually fight this issue.  For more on the factors a court would look to in determining if an independent contractor has been misclassified, see my previous articles here.

 

 

3.       “Restrictive” Scheduling bill is working its way through California’s legislature.

Senate Bill 878 proposes to require retail establishments, grocery stores, and restaurants to set employees schedules 28 days in advance, and impose penalties on the employer if the schedule is modified by the employer.  In addition to the “modification pay” the employer would be required to pay to the employee, if the employer does not comply with the proposed law, the bill also adds a $4,000 penalty for failing to accurately provide “modification pay”, another $4,000 penalty for any harm that results to the employee or “another person” due to a violation of the law, and the ability for the employee to bring suit under the Private Attorney Generals Act (PAGA), among other penalties.

4.       California HR consulting company cited for $1 million for misclassification of exempt employees.

TriNet Human Resources Corp. provides outsource human resources solutions for small and medium sized business, was cited by the U.S. Department of Labor for failing to pay time and a half to 267 employees who worked more than 40 hours per week.  The case shows how often times the test to determine if an employee is exempt or nonexempt is not black or white.  If an HR company can get into legal trouble over the issue, it shows that employers must approach the exempt classification of employees very carefully.

5.       Reminder that California regulations may require an update to sexual harassment policies.

As I’ve written about previously, new regulations issued by California’s Fair Employment and Housing Counsel set for additional steps employers should consider in regards to their discrimination, harassment, and retaliation policies.   These regulations are effective April 1, 2016.

Gary Vaynerchuk on the workplace: a 2016 perspective

Gary_Vaynerchuk

If you know Garyvee, you may be asking yourself how could an employment law blog rely upon advice from someone who has not only admitted, but takes pride in, the fact that he checked out of school in the third grade, does not read books, and uses language that makes most standup comedian’s performances seem tame?  However, to underestimate Gary is a huge mistake, and he brings a refreshing and realistic view of the workplace as it exists in 2016, that many companies could learn some important lessons from.

Gary is an entrepreneur who has a noted career in growing his family wine business from $3M to a $60M business in five years.  After that, he started Vayner Media, a digital marketing company, that now employees over 600 employees.  His is also an angel investor and venture capitalist.  I’ve recently listened to the audio version of his new book, The #AskGaryVee Book, twice in the last couple of weeks.  In listening to the book, I realized that his perspective on the workplace is the modern perspective that I’ve often advocated for on this blog.

For today’s Friday’s Five, here are five lessons from The #AskGaryVee Show (Gary’s Youtube channel) that employers must understand:

1)      Where are the best place to hire employees these days?

Search key terms on twitter search and do the homework.  Do the work.  Search terms about the items the employee would be doing, going to the person’s home page, and then email them asking if they are looking for a job.  It takes time, but you have to put in the work.

 

2)      How do you handle “Eeyore” employees?  The one that always sound like they’re whining and pessimistic.

Fire them.  Energy is very important, and dragging down the team is bad.  Not having the smarts is better than being a downer on the team.  It is pretty easy to see who is enthusiastic about their work.  Also, it is incredible how a small group of employees can affect the company.  Managers have to be careful not to confuse this with being an introvert.  Being introverted is something that needs to be recognized, and not looked down upon.  Moping is different than being quiet and introverted, and being introverted is not necessarily a bad quality to have.

 

3)      On your team, is it better to have employees that specialize in one thing or someone who can wear multiple hats?

Both work, but Gary is a fan of a jack of all trades.  He hates when people use the excuse that they are great at one thing to stop from getting better at another thing.

 

4)      Would you support Vayner employees writing their own books and curating their own content streams/personal brands?

Yes.  You cannot say you want to build around the employees, and then suppress them.  Leaders have to believe so much in themselves that they are not afraid to help employees grow.

 

5)      As a guy who loves hustle and people, what is the “unforgivable sin” one of your employees could make?

Gary is not worried about people’s work ethic.  While hustle may be the leader’s skill, and being able to work long hours, it does not have to be the skill of employees.  The only sin is to not figuring out a way to play nice with the boys and girls they work with.  Being disrespectful or being selfish is completely unacceptable, as is creating conflict.

Only four months into 2016, new regulations require review of policies

Yes, it is only April, but even if employers updated their handbooks at the beginning of 2016, they should take another look at the handbooks to ensure they comply with new regulations issued by California’s Fair Employment and Housing Council.  The new regulations under the Fair Employment and Housing Act are effective April 1, 2016.  While the regulations are a restatement of the current law, they set forth an additional requirement that employers adopt a written discrimination, harassment, and retaliation prevention policy that meet certain conditions.

The new regulations provide that employers “have an affirmative duty to create a workplace environment that is free from employment practices prohibited by the Act.”  The regulations set forth that in addition to providing employees the Department’s DFEH-185 brochure on sexual harassment, or an alternative writing that complies with Government Code section 12950, employers are required to develop a harassment, discrimination, and retaliation policy that meets certain requirements.

Recommended actions for employers:

  1. Update handbooks to ensure the harassment policy complies with the new regulations.
  2. Update handbook acknowledgments to obtain written acknowledgments from employees that they have received the new policy.
  3. Review the new hire packets provided to new employees to ensure it contains the brochure DFEH-185 and all other required documents (disclosures and policies required to be provided to employees is becoming very detailed and complicated to comply with).
  4. Ensure all companies with 50 or more employees are compliant with its obligation to provide two hours of sexual harassment prevention training to all managers/supervisors.

Please contact me if you have any questions about updating handbooks or new hire packets to comply with these regulations.

Severance agreements under California law

This video is the third installment of three videos covering issues surrounding terminations in California.  For today’s Friday’s Five, in this final video in the series I discuss five common questions employers have about severance agreements:

  1. When are severance agreements appropriate in California?
  2. What are common terms in severance agreements? Such as a non-disparagement clauses and reference clauses.
  3. How much of a payment is required to the employee in a severance agreement?
  4. What is a section 1542 waiver of all known and unknown claims?
  5. Can employers include confidentiality provisions in severance agreements?

In order to obtain the termination checklist for California employers, please email me.

New anti-harassment obligations effective April 1, 2016

California’s Fair Employment and Housing Council published new regulations pertaining to anti-discrimination and anti-harassment requirements effective April 1, 2016.  Employers need to review and potentially update their policies in order to meet the new requirements.
The full text of the regulations can be obtained here.

Five documents employers should consider providing at termination

Another Friday, another Friday’s Five.  If you are new to the Employment Law Report, I write about a topic and include five items employers should understand on that topic every Friday.  This Friday’s Five discusses the documents employers should consider providing to employees at the end of employment.

The documents include:

  1. Notice of change of relationship
  2. For Your Benefit, California’s Program for the Unemployed – pamphlet published by the EDD
  3. HIPP notice
  4. COBRA notice
  5. For layoffs, potential WARN Act and California’s Baby-WARN Act

To download these documents and more information click here.

Click here to subscribe to the Employment Law Report Youtube Channel.

Employers should review the issue with legal counsel to ensure that they are providing the required documents for their particular situation.

Terminations: Five considerations for all California employers

This week’s Friday Five is a discussion focused on a discussion of considerations employers should make during the termination process, such as:

  • how to document reasons for terminations (and why it is important to be accurate and honest)
  • when final wages are due
  • where to provide final wages
  • payment of expense reimbursements, and
  • direct deposit of final wages

Five general rules California employers should understand about employment contracts, non-competition and non-solicitation agreements

Friday’s 5 is here.  This post covers five issues that commonly arise when dealing with employment Shaking handscontracts and non-competition/non-solicitation agreements.  It is a very broad area to discuss, so, as always, this is a very general overview.  However, employers and executives alike should have a basic understanding about the legalities and enforceability of such clauses in California.

1.      At-Will employment, and Labor Code Sections 2924 and 2925.

California’s Labor Code section 2922 provides that employees are at-will: “An employment, having no specified term, may be terminated at the will of either party on notice to the other.”

However, if the employer and employee enter into a contract for employment, California’s Labor Code specifically sets out that the employer or the employee may terminate any employment contract for any willful breach of the duties owed to each other.  Labor Code Section 2924 provides:

An employment for a specified term may be terminated at any time by the employer in case of any willful breach of duty by the employee in the course of his employment, or in case of his habitual neglect of his duty or continued incapacity to perform it.

Labor Code Section 2925 likewise provides:

An employment for a specified term may be terminated by the employee at any time in case of any wilful or permanent breach of the obligations of his employer to him as an employee.

2.      Agreements restraining individuals from engaging in a lawful profession is void under Business and Professions Code Section 16600. 

Employment contracts, non-competition agreements, and/or non-solicitation agreements can be challenged under Business and Professions Code section 16600.  That Section provides a very broad rule voiding any contract that limits an employee’s ability to engage in their profession:

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

3.      Exception to Section 16600 – Narrow Restraint

One exception to Business and Professions Code Section 16600’s prohibition on restraining an employee’s ability to work is if the restraint is narrowly drafted.  Restraints on the pursuit of “only a small or limited part of the business, trade or profession” have been upheld by California courts.  As the court in General Commercial Packaging, Inc. v. TPS Package Engineering, Inc. explained, “[A] contract does not have to impair a party’s access to every potential customer to contravene section 16600…. [A] contract can effectively destroy a signatory’s ability to conduct a trade or business by placing a substantial segment of the market off limits.”  General Commercial Packaging, Inc. v. TPS Package Engineering, Inc., 126 F.3d 1131, 1132–33 (9th Cir.1997)

There is also a strong public policy against enforcing agreements that restrict employee’s ability to work in the profession they chose.  California Courts have noted, “the interests of the employee in his own mobility and betterment are deemed paramount to the competitive business interest of the employers ….”

4.      Exception to Section 16600 – Protection of trade secrets and to prevent unfair competition

As one court has noted, “Section 16600 has specifically been held to invalidate employment contracts which prohibit an employee from working for a competitor when the employment has terminated, unless necessary to protect the employer’s trade secrets.” Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.App.4th 853, 859 (1994). In addition, any such restrictions must be “carefully limited.” Id. at 861.

For example, in Gordon Termite Control v. Terrones, 84 Cal.App.3d 176, 179 (1978) the court refused to enforce an agreement prohibiting an employee from calling on any accounts he had called on while with former employer, finding “[k]nowledge of potential customers … is not a trade secret ….”

Moreover, the information must be an actual trade secret to obtain this protection.  In Gordon v. Landau, 49 Cal.2d 690, 694 (1958), the court found that an agreement restricting a door-to-door salesman from using his former employer’s confidential customer list was valid under section 16600.  However, in Letona v. Aetna U.S. Healthcare Inc., 82 F.Supp.2d 1089 (1999), the court rejected the employer’s argument that was seeking to protect information that qualified as a “trade secret” because “Aetna’s own admission that such information is ‘publicly available at Aetna’s website on the Internet” destroyed any argument that the information was secret.

5.  Out-of-State employers must be cautious about using form agreements.

Employers should heed the warning issued by the court in Letona v. Aetna U.S. Healthcare Inc. to out-of-state employers using form agreements in California:

Aetna took the contract it uses in other states and, without regard to California law, and contrary to the clear prohibition contained in section 16600, compelled its California employees to sign it or be fired. Aetna’s claim that it should not be held responsible for wrongful termination unless it “knew” the provision was unenforceable misses the mark.  Aetna knew it was operating in California and would be subject to its laws. Section 16600, or a version thereof, has been on the books since 1872. See Bosley Medical Group v. Abramson, 161 Cal.App.3d 284, 288, 207 Cal.Rptr. 477 (1984). It is not asking too much for Aetna to refrain from requiring its employees to sign presumptively illegal provisions and then firing them when they decline to do so.

Photo: Casa Thomas Jefferson

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