Friday's Five: Five items employers need to understand about automobile and mileage reimbursement under California law

Expense reimbursement may seem like a small issue in comparison with the other areas of liability facing California employers, but the exposure for not appropriately reimbursing employees can be substantial. In Gattuso v. Harte-Hanks Shoppers, Inc., the California Supreme Court clarified the parameters of mileage reimbursement under California law, as well as the three different methods available for employers to reimburse employees for their mileage reimbursement.  This post discusses five issues employers need to know about automobile and mileage reimbursement under California law.

1. Mileage reimbursement based on IRS mileage rate is presumed to reimburse employee for all actual expenses

The IRS publishes standard mileage rates each year (and sometimes adjusts these rates during the year). The 2014 mileage rate is published on the IRS mileage rate here.

If the employee challenges the amount reimbursed, the employee bears the burden to show how the “amount that the employer has paid is less than the actual expenses that the employee has necessarily incurred for work-required automobile use (as calculated using the actual expense method), the employer must make up the difference.” Gattuso, at 479.

The California Supreme Court also held that the reimbursement rate can be negotiated by parties as long as it fully reimburses the employee, and the amount does not have to be set at the IRS mileage rate. The Court also warned that employee cannot waive the right to be fully reimbursed for their actual expenses:

We agree that, as with other terms and conditions of employment, a mileage rate for automobile expense reimbursement may be a subject of negotiation and agreement between employer and employee. Under section 2804, however, any agreement made by the employee is null and void insofar as it waives the employee’s rights to full expense reimbursement under section 2802.

Gattuso, at 479.


2. Reimbursement Method: Actual Expense Method

In examining the different methods of reimbursement, the Supreme Court held that the actual expense method is the most accurate, but it is also the most burdensome for both the employer and the employee. Gattuso, at 478. Under the actual expense method, the parties calculate the automobile expenses that the employee actually and necessarily incurred and then the employer separately pays the employee that amount. The actual expenses of using an employee’s personal automobile for business purposes include: fuel, maintenance, repairs, insurance, registration, and depreciation.

3. Reimbursement Method: Mileage Reimbursement Method

The Court recognized that employers may simplify calculating the amount owed to an employee by paying an amount based on a “total mileage driven." Gattuso, at 479.

Under the mileage reimbursement method, the employee only needs to keep a record of the number of miles driven for job duties. The employer then multiplies the miles driven by a predetermined amount that approximates the per-mile cost of owning and operating an automobile. The Court recognized that the mileage rate agreed to between the employer and employee is “merely an approximation of actual expenses” and is less accurate than the actual expense method. It is important to note that while this amount can be negotiated, the employee still is unable to waive their right to reimbursement of their actual costs as mentioned above.

4. Reimbursement Method: Lump Sum Payment

Under the lump sum method, the employee need not submit any information to the employer about work-required miles driven or automobile expenses incurred. The employer merely pays an agreed upon fixed amount for automobile expense reimbursement. Gattuso, at 480. This type of lump sum payment is often labeled as a per diem, car allowance, or gas stipend.

In Gattuso, the Court made it clear that employers paying a lump sum amount have the extra burden of separately identifying and documenting the amounts that represent payment for labor performed and the amounts that represent reimbursement for business expenses.

5. All expenses incurred in an employee’s course and scope of their job must be reimbursed by the employer.

In addition to mileage, employers may also have to reimburse employees for other costs they incurred in driving their personal cars for business. In making the determination about whether an employee’s actions are in the “course and scope” of their job, courts examine whether the expense being sought by the employee is “not so unusual or startling that it would seem unfair to include loss or expense among other costs of the employer’s business.” This is a very fact specific determination that employers need to approach with caution.

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Friday's Five: Five answers to common questions about severance pay and severance agreements

Severance pay is not required under California law. However, employers who have potential disputes with employees that are leaving employment should consider whether offering severance pay in exchange for a signed severance agreement containing a release of claims against the company may be useful in avoiding costly litigation. Here are answers to five common questions about severance:

1. Are employees entitled to severance pay?
No. If an employee is an at-will employee, and either the employer or the employee decides to end the employment relationship, the employer is not required to provide any type of severance to the employee.

2. If severance pay is not required, why would employers offer it?
There are a number of reasons that employers offer severance pay. If the employer’s business has slowed down and it needs to layoff employees, but the employer wants to cushion the effect of the layoff, severance can be offered. Also, if the employer believes that there is a potential dispute between it and an employee, the employer may choose to pay some severance in exchange of a release of claims by the employee in order to avoid any potential litigation.  If done properly, an employee's acceptance of a severance agreement would effectively waive any and all claims that he or she may have against the company.  If there is any potential for a dispute about any issues that arose during employment, entering into a severance agreement could be an effective way to avoid costly and time consuming litigation. 

3. Does the employer have to pay the employee for a release of claims?
If the employer asks the employee to release all claims the employee may have against the company, generally there needs to be some consideration provided to the employee for the release of his or her rights. Consideration is a legal term, and very generally means something of value that each side agrees to exchange (this is a very oversimplified definition). In severance agreements, the consideration is usually, but is not required to be, some form of payment by the employer that is not already legally obligated to be made in exchange for the release of claims (i.e., an agreement not to sue) by the employee.

4. What terms are generally included in a severance agreement?
Here is a list of common terms included in severance agreements:

  • A general release with a Civil Code section 1542 waiver releasing all known and unknown claims.
  • Confidentiality
  • No admission of liability
  • No present or future employment
  • Non-disparagement clause which can also set forth what job reference, if any, will be given to any prospective employers
  • Return of company property and non-solicitation of customers clause

5. Are there any special considerations for employees 40 years old or older that need to be included in a release?
Yes. The Older Workers Benefit Protection Act (OWBPA) protects individuals 40 years old or older. The OWBPA provides that in order to release a claim for age discrimination must meet certain requirements. Some of these requirements include that the employee is advised to consult with an attorney, the waiver is easily understood, the individual is given at least 21 days to consider the agreement; and the individual is given at least 7 days following the execution of the agreement to revoke the agreement. The 21 day consideration period can be waived by the employee, but the seven day revocation period after the agreement is signed cannot be waived by the employee. Therefore, it is important to consider potentially not paying any money until after the seven day revocation period expires. If the employer is offering the release to a group or class of employees a longer consideration period and other requirements apply. It is highly recommended that employers receive the assistance of counsel to ensure that employees 40 years old or older effectively waive any rights under the OWBPA. For more information, the EEOCs’ website provides a good explanation and some examples.

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Five tips about tips under California law

Today's Friday's Five provides a few points for employers to consider who have employees that receive gratuities. California law is very specific regarding gratuities left for employees, and since tips are property of the employee, employers must approach this area with caution. Here are five “tips” about tips in California.

1. Tips are employee’s property.
The Labor Code section 350 states unequivocally that “Every gratuity is hereby declared to be the sole property of the employee or employees for whom it was paid, given or left for.” In addition, Labor Code section 351 clearly states that “[n]o 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, or deduct any amount from wages due an employee on account of a gratuity, or require an employee to credit the amount, or any part thereof, of a gratuity against and as a part of the wages due the employee from the employer.”

2. Timing requirements of payment of tips left on credit cards.
Payment of a gratuity made by a patron using a credit card must be paid to the employee not later than the next regular payday following the date the patron authorized the credit card payment.

3. Mandatory tip pools are permissible under California law.
Labor Code section 351 clearly sets forth that tips are the sole property of the employee, yet California courts have also reached the seemingly contradictory conclusion that employers may lawfully require that employees must share this “sole property” with other employees through tip pools. In Leighton v. Old Heidelberg, Ltd., the court authorized mandatory tip pooling policies. Generally, mandatory tip pools are permissible as long as (1) only employees who provide direct table service participate in the tip pool and (2) the tip pool distribution is consistent with industry standards.

4. There is a difference between a mandatory service charge and a tip.
Mandatory service charges are not tips and are not governed by Labor Code section 351. Mandatory service charges are charges imposed by an establishment for specific reason, such as for parties larger than eight people. Unlike tips, these charges may be received by the employer and distributed, if at all, as the employer sees fit.

5. There is no tip credit allowed for under California law.
Tips earned by an employee cannot be counted towards the minimum wage requirement under California law. In addition, employers may not deduct the costs of any credit card processing fees or any other charges form the employee’s tips or wages.

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Friday's Five: Five things California employers should not forget about meal and rest breaks

Back to some basics with this Friday’s Five. This post revisits some meal and rest break requirements. It has been a couple of years since the California Supreme Court issued it groundbreaking ruling in Brinker Restaurant Group v. Superior Court, and it is a good time for employers to audit these policies and practices. Here are five things employers should not forget regarding about meal and rest breaks.

1. Timing of breaks.
Meal Breaks
The California Supreme Court made clear in Brinker Restaurant Group v. Superior Court that employers need to give an employee their first meal break “no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work.” Here is a chart to illustrate the Court’s holding:

Rest Breaks
As for of rest breaks, the Court set forth that, “[e]mployees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.” This rule is set forth in this chart:

In regards to when rest breaks should be taken during the shift, the Court held that “the only constraint of timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable.’” The Court stopped short of explaining what qualifies as “insofar as practicable”, and employers should closely analyze whether they may deviate from this general principle.

2. Rule regarding waiver of breaks.
Meal Breaks
Generally meal breaks can only be waived if the employee works less than six hours in a shift. However, as long as employers effectively allow an employee to take a full 30-minute meal break, the employee can voluntarily choose not to take the break and this would not result in a violation. The Supreme Court explained in Brinker (quoting the DLSE’s brief on the subject):
The employer that refuses to relinquish control over employees during an owed meal period violates the duty to provide the meal period and owes compensation [and premium pay] for hours worked. The employer that relinquishes control but nonetheless knows or has reason to know that the employee is performing work during the meal period, has not violated its meal period obligations [and owes no premium pay], but nonetheless owes regular compensation to its employees for time worked.
Rest Breaks
Rest breaks may also be waived by employees, as long as the employer properly authorizes and permits employees to take the full 10-minute rest break at the appropriate times.

3. Timekeeping requirements of meal breaks.
Meal breaks taken by the employees must be recorded by the employer. However, there is no requirement for employers to record 10-mintute rest breaks.

4. Implementing a procedure for employees to notify the company when they could not take a break.
If employers have the proper policy and practices set up for meal and rest breaks, the primary issue then becomes whether the employer knew or should have known that the employee was not taking the meal or rest breaks. Therefore, many allegations that the employer was not providing the required breaks can be defended on the basis that the employer had an effective complaint procedure in place to inform the employer of any potential violation, but failed to inform the employer of these violations.

5. Implementing a policy of paying employees for missed breaks and recording these payments.
Employers should show that in addition to the complaint procedure mentioned above, that the company has a system in place to correct any violations. If during an investigation, the employer confirms that the employee in fact missed the break because of the rush of business or some other factor, the company should pay the employee the one hour “premium pay” penalty at the employee’s regular rate of pay. Also, the company should record these payments made to employees in case it needs to prove later on that it has an effective remedial process in place to address missed breaks.

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Friday's Five: Five ways employers can receive requests for employees' personnel and wage records

Employers can receive requests for employment records of current and former employees though different ways. It is important for employers to first carefully review the request to understand what is being requested. It is important to understand who is making the request? Is the request only seeking a personnel file? Is the request only seeking payroll records? It is possible that a third party, such as a governmental agency or a party in litigation is seeking employment records for an employee. In this case, it is important for the employer to understand its obligations in protecting the privacy interest of the employee in connection with the rights of third parties to obtain these records.

The following are five ways that employers may have to provide copies of employment records or make employment records available for inspection.

1. Request under Labor Code Section 432, which provides employees with a right to receive a copy of any signed document upon request by the employee.

2. Request under Labor Code section 1198.5, which provides for the right of current and former employees to inspect and receive a copy of personnel records.

A few guidelines regarding requests under section 1198.5:

  • Employers must comply no later than 30 days from when the request is received.
  • If employee asks for copy of file, employer may charge actual costs of coping to employee.
  • Employers may take reasonable steps to ensure identity of the current or former employee.
  • Employers may redact the names of any nonsupervisory employees contained in the personnel file.
  • Employees have no right to inspection under this section if lawsuit has already been initiated.
  • Failure to comply with this section can result in a $750 penalty.

3. Request under Labor Code section 226(b), which allows current and former employees to inspect or copy records pertaining to their employment.

A few guidelines regarding requests under section 226(b):

  • Employers can take reasonable steps to ensure the identity of a current or former employees, and that they are actually making the request.
  • Actual costs of reproduction may be charged by the employer.
  • Employers must comply within 21 days of request.
  • Failure to comply with this section can result in a $750 penalty.

4. Public agencies, such as the Department of Labor or California Labor Commissioner, have the right to inspect records and workplaces under limited circumstances.

For example, under the Federal Labor Standards Act (FLSA), the Department of Labor (DOL) has certain permissions to investigate and gather date about wages, hours worked, and other working conditions at workplaces. The FLSA also provides the DOL limited permission to enter employers’ premises, review records, and even potentially question employees about employment practices. Upon receiving a request from any public agency, such as the DOL or the California Labor Commissioner, an employer should immediately review what obligations and rights it has in responding to the request.

5. Requests for records through subpoenas.

Employers can also receive subpoenas from third parties seeking employment records. The “custodian of records” is responsible for responding to the requests and producing employment records in certain circumstances. California law requires that a request for a personnel file include a “Notice to Consumer” notifying the employee that such records are being sought, and providing the individual an opportunity to object to the disclosure of the information. If the employee or former employee has not been notified, or objects to the production of the requested records, the employer should not produce the information requested unless and until a court orders otherwise, or the affected employee agrees to the production. If the subpoena seeks the disclosure of confidential or proprietary information, you should contact an attorney to see if the company has an obligation to move to quash the subpoena or seek an appropriate protective order to preserve the confidentiality of the information sought.

Employers should not produce requested documents before they are due and without being satisfied that the proper subpoena procedures and notice requirements, if applicable, have been met. Employers do have a duty to maintain the privacy rights of current and former employees.

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Friday's Five: Five points to understand about California's new requirements for sexual harassment training

AB 2053 was signed into law by Governor Brown, and as of January 1, 2015, employers have to comply with new obligations regarding the sexual harassment training already required for some employers under California law.  Here are five issues employers should understand about AB 2053. 

1. What are employer’s current obligations to have supervisors attend sexual harassment prevention training before AB 2053 was passed?

In California, employers with 50 or more workers must provide at least two hours of sexual harassment prevention training to all supervisors. This training must be provided to supervisors within six months of the time they become a supervisor, and then at least once every two years. The training must cover federal and state statutory laws regarding prohibitions against sexual harassment, remedies available to victims, how to prevent and correct sexual harassment, discrimination, and retaliation. This requirement is set forth in California Government Code section 12950.1.

2. What new obligations does AB 2053 add to California’s sexual harassment training requirement?

AB 2053 amends Government Code section 12950.1, and takes effect January 1, 2015. The new law requires employers subject to the sexual harassment training requirement must continue with their obligations under Gov. Code section 12950.1, but to “also include prevention of abusive conduct as a component of the training and education….”

The law defines “abusive conduct” as follows:

For purposes of this section, “abusive conduct” means conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer’s legitimate business interests. Abusive conduct may include repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance. A single act shall not constitute abusive conduct, unless especially severe and egregious.

Therefore, going forward, employers need to provide training that complies with this new requirement. Currently, there are no guidelines specifically setting forth details about how long the training should focus on this “abusive conduct” requirement. Employers are encouraged to take reasonable steps to implement a training that complies with this new requirement (I’m updating my training materials right now). Employers providing training by the end of 2014 should seek a training class that complies with the new requirements immediately.

3. Does it create a new cause of action for “abusive conduct” in the workplace?

No. While it may not good business practices, there is no law in California that makes workplace bullying or “abusive conduct” as defined in AB 2053 illegal. The policy reason behind not making such conduct illegal is that it would be difficult to determine what conduct is simply discipline, counseling, and day-to-day management actions versus actions taken with “malice” by a manager. Making such conduct actionable under the law would, in effect, make the court system the final decision maker in resolving normal day-to-day workplace disputes, which could stress the already overwhelmed court system.

4. If employers have already conducted sexual harassment training within the last few months, do they need to re-train their supervisors on January 1, 2015?

The law is unclear on this issue. I placed a call into Assemblywoman Lorena Gonzalez’ office, author of the bill, and was told by a spokesperson that the law would not require re-training of supervisors any sooner than when the two year deadline required them to receive their next training. However, employers should approach this issue with caution, as the law is not clear on the requirement regarding when supervisors must receive training compliant with this new requirement regarding “abusive conduct.” Also, if employers are conducting training of its supervisors between now and the end of 2014, it goes without saying that the training should cover this new requirement to avoid any issues.

5. Could this amendment eventually lead to a law making “abusive conduct” illegal?

Potentially. Even though there is no legal cause of action for “abusive conduct” as defined in the new law, this type of legislation could be amended to make this conduct illegal in the future.

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Friday's Five: Five things every California employer needs to know about the newly enacted paid sick leave law

On September 10, 2014, the Governor signed into law a bill that requires a minimum of three paid sick days per year for employees. The new law applies to all employers, regardless of size. Here are five essential points employers must understand to begin the process of meeting their obligations under the new law.

1. How much paid sick time must employers provide employees?

Starting on July 1, 2015, any employee who works in California for 30 or more days within a year is entitled to paid sick days. Employees accrue paid sick days at the rate of one hour for every 30 hours worked, beginning at the start of their employment. Employees can use accrued paid sick days beginning on the 90th day of employment.

2. Does this apply to all employers, and when do employers need to comply with this new sick leave requirement?

The law applies to all California employers, regardless of size. It also covers all employees, part-time, full-time, exempt, and non-exempt. Leave may be taken by employees for diagnosis, care, or treatment or preventative care for an employee or an employee’s family member, and victims of domestic violence and sexual assault.

The law takes effect on July 1, 2015. However, it is advisable for employers to start taking action and revising handbooks and leave policies in the beginning of 2015.

Accrued paid sick days carry over to the following year of employment. Employers may limit an employee’s use of paid sick days to 24 hours or three days in each year of employment.

Employers do not have to provide additional accrual or carry over if the full amount of leave is received by the employee under the employer’s leave policy which at least provides for the minimum requirements under the law.

3. Can employers limit the use of paid sick leave or cap the amount of accrual?

Limits on amount of leave used in one year: Employers may limit the use of sick leave at 24 hours or three days of paid sick leave, or equivalent paid leave or paid time off, for each 12 month period based on the employee’s year of employment, a calendar year, or rolling 12-month basis.

Limits on amount used in one day: An employee may determine how much paid sick leave he or she needs to use, but the employer can set a reasonable minimum increment not to exceed two hours that the employee must use each time.

Cap of accrual of total paid leave: In addition, employers can cap the accrual of paid sick leave to 48 hours or 6 days.

Employers may not require that employees obtain a replacement worker to fill their position in order to take the leave. Employees are required to provide reasonable advance notice if the time off is foreseeable, otherwise employees must provide notice of the need for leave as soon as practicable.

4. Does accrued but unused sick leave have to be paid out to an employee upon separation from employment?

No, an employer is not required to provide compensation to an employee for accrued, unused paid sick days upon leaving employment. However, if an employee leaves employment and is rehired by the employer within one year, previously accrued and unused paid sick days must be reinstated. The employee is entitled to the previously accrued and unused paid sick days and to accrue additional paid sick days upon rehiring.

5. What documentation and written requirements does the new law impose on employers?

The law requires that employers provide an employee with written notice setting forth the amount of paid leave available. This information must be included on the employee’s pay stub, or may be provided to the employee in a separate writing given to the employee on the employee’s pay date. In addition, the law amends Section 2810.5 of the Labor Code and adds the following language that must be provided on the employee’s wage notice: “That an employee: may accrue and use sick leave; has a right to request and use accrued paid sick leave; may not be terminated or retaliated against for using or requesting the use of accrued paid sick leave; and has the right to file a complaint against an employer who retaliates.”

In addition, the law requires employers to document and keep records of the hours worked and paid sick days accrued and used by an employee for at least three years. Employees (as well as the Labor Commissioner) have the right to access these records. Failure to keep the required records creates a presumption against the employer that the employee is entitled to the maximum number of hours provided for under the law.

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Friday's Five: Five items to understand about employee personnel files under California law

1. Current and former employees have the right to inspect or copy personnel files.
Under Labor Code section 1198.5 employees have the right to inspect or receive copies of personnel files and records relating to the employee’s performance or grievance concerning the employee. Employers are legally required to maintain personnel files for at least three years after the employee stops working for the employer. However, since the statute of limitations for wage and hour claims can extend back four years, many employers keep the files at least four years.

2. The terms “personnel file” or “personnel records” are not defined in the Labor Code.
Without the terms “personnel records” or “personnel file” ever being defined, there is considerable ambiguity about what documents should be keep in an employee’s personnel file.
While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement(“DLSE”) expressing the following view:

Categories of records that are generally considered to be "personnel records" are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of "personnel records" (this list is not all inclusive):

  1. Application for employment
  2. Payroll authorization form
  3. Notices of commendation, warning, discipline, and/or termination
  4. Notices of layoff, leave of absence, and vacation
  5. Notices of wage attachment or garnishment
  6. Education and training notices and records
  7. Performance appraisals/reviews
  8. Attendance records

Employers should also consider placing the following documents in personnel files:

  • Signed arbitration agreements
  • Sexual harassment compliance records for supervisors
  • Sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments)
  • Wage Theft Protection Act notice
  • If commissioned employee, written commission agreement signed by both the employer and employee beginning January 1, 2013.
  • Warnings and disciplinary action documents.
  • Performance reviews
  • Documents of any grievance concerning the employee
  • Documents pertaining to when the employee was hired
  • Records pertaining to last day of work and documenting reason for departure from employment

3. Personnel records must be made available not less than 30 days from date employer receives a written request to view the file.
The employer may charge the employee for the costs of copying the file, but the charge cannot exceed actual cost of reproduction.

4. Employers have the right to redact the names of any other nonsupervisory employee that are listed in the employee’s personnel file before making it available to the employee.

5. Employers may be subject to a $750 penalty for not making requested records available.
The penalty can be assessed by the Labor Commissioner, and the employee could also bring an action to compel production of his or her file and recover attorney’s fees.

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Friday's Five: Top Five Points To Understand About Mediation

Five items parties need to understand about mediation.

1. Mediation is non-binding.
Mediation is a voluntary process in which litigants (or even parties prior to litigation) agree to use a private third-party to help settle the case. People sometimes confuse mediation with arbitration. Arbitration is when parties agree to use a private third-party to hear their case, much like a judge, to make decisions about the case, and eventually decide the case. Arbitration can be binding on the parties, and the arbitrator actually decides who is right and wrong as a matter of law. On the other hand, a mediator is not deciding any issues about the case, but is simply hearing both sides’ positions, and then works with the parties to see if there is a potential resolution that the parties would both agree to. The mediator has no ability to decide issues of the case, or make any binding rulings about the case. The mediator is only an unbiased third-party attempting to get the parties to consider a possible resolution to the case.

2. Mediation takes place with a private mediator –usually not the court.
The parties voluntarily agree upon the selection of a mediator. Usually the mediator has expertise in the area of the law that the case involves so that he or she can move quicker into the substance of the parties’ disagreement. There are many retired judges or lawyers that work as mediators. Some mediators are active practicing lawyers that also have a mediation service established.
The mediation usually takes place at the mediator’s office. Normally the mediator has the parties in separate rooms, and the mediator walks between the two rooms. There are many mediations where the parties will not see other side the entire day.

3. Negotiations during the mediation are privileged and cannot be used against either party during litigation.
California law prevents any of the negotiations or potential admissions made during mediation from being brought up in court or during litigation. The rationale for this rule is that the courts want people to be able to negotiate during mediation, this involves some give and take. Therefore, in order to assist the mediation process, any of the discussions or negotiations during mediation are prevented from being used against the other party. This allows parties to discuss items more freely during mediation in hopes of having a better chance at resolving the case. However, it should be noted that if a party makes an admission during mediation, the other party can still conduct discovery after the mediation and bring that admission into the case through the standard discovery process. So parties should follow their counsel’s advice about which facts to share during the mediation process. But rest assured, the fact that one party agreed to offer a certain amount to settle the case during mediation, this offer to settle cannot be brought up to the jury later in the case as a way to establish liability.

4. The mediator’s only role is to get the case settled.
The mediator is not there to make friends, tell you if he believes you more than the other side, or make a value judgment about the case or people involved. His or her role is simply to get the case resolved. This usually means that for a successful mediator both sides don’t like the mediator. This is because the mediator was able to move two opponents to agree to a resolution of the case, and to get to this point usually means that both sides are unhappy with the resolution.

5. Even if the case does not settle at mediation, it could still be a successful mediation.
The parties need to understand that mediation is a process and it is hard to settle cases in one day – even a long day - of mediation. Sometimes it is clear during the mediation that the parties cannot settle the case. Sometimes it takes the mediator working with the parities for weeks after the mediation to arrive at a settlement. If the case does not settle, it is also beneficial for the parties that during the course of a mediation to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and motions filed to narrow down the issues that are being litigated.

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Friday's Five: Five areas of liability facing California employers

1. Meal and rest breaks.
If you did not know of this exposure already existed in California, can I recommend some reading here, here and here?

2. Exempt vs. non-exempt classification of employees.
The default under California law is that every employee is entitled to overtime pay at a rate of time and a half or double of the employee’s hourly rate of pay. An employee is not entitled to overtime if the employer meets its burden in establishing that the employees qualifies under one of legally proscribed exempt positions (the positions are called exempt because the employee is exempt from the overtime requirements). Some exempt positions are:

  • Executive
  • Administrative
  • Professional
  • Outside sales
  • Computer professional
  • Commissioned sales

Exempt positions have very nuanced requirements that must be met in order for the employee to properly be considered exempt from the overtime pay requirement. For a company to make a determination of whether an employee is exempt, it must approach this determination carefully, and ensure the employee is pay enough in a salary and performs duties required by the exemption. The company should also consider documenting the specific exemption the employee qualifies for. For a list of the possible exempt positions under California law, the DLSE published one here.

3. Off the clock work.
Employees must be paid for all hours that the employee is subject to the employer’s control. Generally, if the employer knows or has reason to believe that an employee is working, that work must be paid for. To prevent off the clock claims, employers should develop clear policies on time keeping and prohibiting off the clock work, as well as having a well thought out complaint mechanism for employees to utilize. A complaint procedure is a good defense for claims of off the clock work made after the fact.

4. Proper calculation of overtime.
Generally, employers must pay one and one-half times the employee's regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek. In addition, employer must pay double the employee's regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

In addition, the “regular rate of pay” include not only the employee’s hourly rate, but also the amount of piecework earnings and commissions earned by the employee. These additional earning must be calculated into employee’s regular rate of pay. The employee’s time and a half or double time overtime must be calculated on this higher regular rate.

5. Independent contractor misclassification.
As I’ve written about previously, the classification of whether a worker is an independent contractor or an employee is a multifactor test. Failure to conduct this analysis properly can expose employer to substantial civil penalties.
 

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Friday's Five: More than five required items that should be included in a new hire packet

Here is a list of some of the required notices employers must provide to new employees in California. Sometimes I have a hard time coming up with five rules or items for the Friday’s Five list, but not this time – I blew through five items (it is California after all): 

Document Title

Link to Document

Notice to Employee (Wage Theft Prevention Act) (for non-exempt employees)

Download here

I-9 – Employment Eligibility Verification

Download here

Right to Workers’ Compensation Benefits pamphlet

Download here

State Disability Insurance Provisions pamphlet - DE 2515

Download here

Paid Family Leave pamphlet - DE 2511

Download here

Sexual Harassment pamphlet

Download here

New Health Insurance Marketplace Coverage Options Form

Form for employers with health insurance plans - download here

Form for employer without health insurance plans - download here

Other documents I often recommend that employers have in their new hire packets are:

·   Commission Agreement (if applicable)

·   Meal and Rest Break Acknowledgment of employer’s policy

·   Employee Handbook and Acknowledgment

 

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San Diego City Council moves closer to raising minimum wage and mandating paid sick leave for San Diego employers

The San Diego City Council approved an ordinance that increases the minimum wage required to be paid to workers within the city to $11.50 per hour by 2017. In addition the ordinance calls for the minimum wage to automatically increase every year after 2018 by indexing the minimum wage to inflation. Currently California's minimum wage is set at $9.00 per hour, which increased from $8.00 per hour in July 2014

San Diego Proposed Minimum Wage Increases

Current Minimum Wage

$9.00 per hour

January 1, 2015

$9.75 per hour

January 1, 2016

$10.50 per hour

January 1, 2017

$11.50 per hour

January 1, 2018

Minimum wage will increase each year measured in the increase of the Consumer Price Index.

The ordinance also requires employers to provide up to five days of paid sick leave. If enacted, the sick leave requirement will begin in April 1, 2015 and provides employees with one hour of paid sick leave for every 30 hours worked. Leave must be carried over from year to year, but employers may cap the use of the sick leave to 40 hours of paid leave within a benefit year. The ordinance also provides that:

-          For employees that are not covered by the overtime requirements of California law, it will be presumed that they work 40 hours a week. If an employee works less than 40 hours they will only accrue sick leave based on their actual hours worked.

-          Employers may set a reasonable minimum increment for use of sick leave, but this minimum may not exceed two hours.

-          If an employee separates employment, but returns to work within six months, all previously unused sick leave will be reinstated to the employee. 

-          If an employee uses sick leave for more than three consecutive work days, the employer may require “reasonable” documentation from a licensed heath care provider justifying the leave. 

Currently the ordinance is before San Diego’s Mayor, Kevin Faulconer, who has stated he will veto the measure. However, the ordinance was passed by a super-majority that can override the Mayor’s veto, possibly forcing the issue to a referendum. If this occurs, the City Council will have the option to either rescind the legislation, or submit the matter to the voters of San Diego.

 

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Friday's Five: Five California Labor Code provisions employees cannot waive

Here is a list of five rights provided to employees under the California Labor Code that the employee may not waive by agreement with an employer.

1. Minimum wage
Labor Code Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws. That statute clearly voids any agreement between an employer and employee to work for less than minimum wage or not to receive overtime.

2. Overtime
In Gentry v. Superior Court, the Supreme Court explained:

[Labor Code] Section 510 provides that nonexempt employees will be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work. Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws.

By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable. “Labor Code section 1194 confirms ‘a clear public policy . . . that is specifically directed at the enforcement of California’s minimum wage and overtime laws for the benefit of workers.’"

3. Expense reimbursement
Labor Code section 2802 requires employers to reimburse its employees for “necessary expenditures or losses incurred by the employee” while performing his or her job duties. Labor Code section 2804, clearly provides that an employee cannot waive this right to be reimbursed for or liable for the cost of doing business. Section 2804 provides, “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void….”

4. Right to participate in PAGA representative actions
The California Supreme Court recently clarified that employees may not waive their right to bring a representative action under the Private Attorney General Act (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.”

5. Right to receive undisputed wages
Under Labor Code section 206.5 employers and employees may not enter into agreements that waive the employee’s right to receive wages that are undisputed. Labor Code section 206.5 also provides that an employer may not require “as a condition of being paid, to execute a statement of the hours he or she worked during a pay period which the employer knows to be false.”

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Friday's Five: Five legal pitfalls startup companies cannot make

1. Classifying all employees as independent contractors
To qualify as an independent contractor, the employer has the burden of proof to establish that the worker is actually an independent contractor and not an employee. I’ve discussed the parameter of this “economic realities” test here.  In addition to owing unpaid minimum wages and potential unpaid overtime, the employer also faces steep penalties for misclassifying independent contractors.

2. Treating all employees as exempt employees and not paying overtime.
An employee cannot agree to work without being paid overtime unless they qualify as an exempt employee. To qualify as an exempt employee, generally, the employee must perform certain duties, and must be paid a certain threshold in wages (usually at least two times the equivalent pay of minimum wage based on a 40 hour week).  

3. Not having a handbook and written policies.
Even if startup companies have no money, the Labor Code still applies. They still have to pay more than minimum wage, provide and record meal and rest breaks, issue wage notices to new employees, and otherwise comply with California law. A handbook, new hire packet, and standardized set of written policies is a good place to start.

4. Not providing clear offer letter with at-will provisions and clear understanding of who owns social media accounts and passwords.
Companies should providing a writing setting forth the employee’s compensation, stock option rights, at-will status, as well as who owns the rights to social media accounts and the passwords to access the accounts. Much better to have this set out early in order to avoid costly litigation and disruption in your business later.

5. Not having the right employment law counsel.
Startup owners should have a relationship with an attorney that actually practices California employment law. Have an agreement with them that for basic quick questions there will be little if no charge. I often tell my clients that if it takes a quick phone call to review a decision about an employment issue, there will be no charge. Of course this has to be within reason, as your lawyer sells his or her time to make a living.  So to make this easier on your lawyer, do the work before you call, and just double check that the decision you have made, or the letter you drafted is good-to-go. Otherwise, calling your lawyer and asking him to draft the letter will take him time (usually more time that the client could have done it in) and will increase the cost of legal services.

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Procedures to follow in investigating sexual harassment claims

Friday's Five: Five rules every California employer should know about providing final wages to employees

This Friday's Five is coming out a little late in the day, but as they say, better late....  I've been fielding a lot of questions about final wage payment requirements.  So here are five rules every employer should know about providing final wages to employees:

  1. An employee who is discharged must be paid all of his or her wages, including accrued vacation, immediately at the time of termination.
  2. An employee who gives at least 72 hours prior notice of quitting, and quits on the day given in the notice, must be paid all earned wages, including accrued vacation, at the time of quitting.
  3. An employee who quits without giving 72 hours prior notice must be paid all wages, including accrued vacation, within 72 hours of quitting.
  4. An employee who quits without giving 72-hours’ notice can request their final wage payment be mailed to them. The date of mailing is considered the date of payment for purposes of the requirement to provide payment within 72 hours of the notice of quitting.
  5. Final wage payments for employees who are terminated (or laid off) must be made at the place of termination. For employees who quit without giving 72 hours’ notice and do not request their final wages be mailed to them, is at the office of the employer within the county in which the work was performed.

For any employer who willfully fails to pay any wages due a terminated employee subject the employer to waiting time penalties under Labor Code section 203. Waiting time penalties accrue at an amount equal to the employee's daily rate of pay for each day the wages are not paid, up to a maximum of thirty calendar days.

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Complying With California's Minimum Wage Increase

Here is a short video regarding some items California employers should consider about the minimum wage increase taking effect July 1, 2014.

 For more information about the minimum wage increase:

Five issues California employers should review before the minimum wage increases July 1, 2014

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Five Things You Need To Know About Arbitration Agreements After The California's Supreme Court's Ruling In Iskanian v. CLS Transportation Los Angeles, LLC

1. Arbitration Agreements: What Are They?
Employers can agree that they and any employees who enter into an arbitration agreement will resolve their differences before a private arbitrator instead of civil court. There are many different arbitration companies to choose from, but the American Arbitration Association and JAMS are two of the larger ones that are routinely appointed in arbitration agreements. Arbitrators are private companies that usually hire retired judges to resolve disputes in a private setting as opposed to civil court.

2. Are Arbitration Agreements Enforceable in California?
Generally speaking, if the agreement is drafted and implemented properly, it is enforceable. However, arbitration agreements are routinely struck down by courts if they are not properly drafted. For example, recently a California court held in Ajamian v. CantorCO2e, that an arbitration agreement was not enforceable because it required the employee to waive statutory damages and remedies.  In addition, the agreement in that case only allowed the employer to recover its attorney’s fees if successful, not the employee.  The Court held these terms caused

3. Why Would an Employer Implement an Arbitration Agreement?
There are a number of reasons. The arbitration process can proceed more quickly than civil litigation, saving a lot of time and attorney’s fees in the process. For example, often times the discovery process moves more quickly, and if there are any disputes, the parties can raise them with the arbitrator telephonically, instead of the lengthy motion process required to resolve disputes in civil court. The arbitration process is also confidential, so if there are private issues that must be litigated, these issues are not filed in the public records of the courts. The parties also have a say in deciding which arbitrator to use in deciding the case, whereas in civil court the parties are simply assigned a judge without any input into the decision. This is very helpful in employment cases, which often times involve more complex issues, and it is beneficial to the parties to select an arbitrator that has experience in resolving employment cases.

4. Are Class Action Waivers Enforceable In Arbitration Agreements?
Yes. The California Supreme Court ruled in Iskanian v. CLS Transportation Los Angeles, LLC that class action waivers can be enforceable, following the standards set forth by the U.S. Supreme Court in AT&T Mobility v. Concepcion.  However, Plaintiffs continually challenge class action waivers on numerous grounds, and it is critical employers’ agreements are properly drafted and up-to-date. In addition, while courts will uphold class action waivers, the California Supreme Court held that employee may still bring representative actions under the Private Attorneys General Act (PAGA). PAGA claims are limited to specific penalties under the law, and have a much shorter one year statute of limitations compared to potentially a four year statute of limitations for most class actions.

5. Based On the Holding in Iskanian, Should Every Employer Enter Into Arbitration Agreements With Its Employees?
No. The decision to implement an arbitration agreement should be reviewed with an employment lawyer to discuss the positives as well as the negatives of arbitration agreements. As discussed above, there are a lot of benefits of having an arbitration agreement in place, but it does not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. In addition, while a class action waiver may be enforceable, employers still face substantial liability under PAGA representative actions, and a strategy in implementing a class action waiver should be thought through with the help of informed counsel.

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California Supreme Court Upholds Class Action Waivers: Iskanian v. CLS Transportation Los Angeles, LLC

Today, the California Supreme Court issued a ruling in Iskanian v. CLS Transportation Los Angeles, LLC regarding the enforceability of class action waivers in arbitration agreements. In upholding class action waivers in arbitration agreements, the Supreme Court explained in the introduction of the opinion:

The question is whether a state’s refusal to enforce such a waiver on grounds of public policy or unconscionability is preempted by the FAA. We conclude that it is and that our holding to the contrary in Gentry v. Superior Court (2007) 42 Cal.4th 443 (Gentry) has been abrogated by recent United States Supreme Court precedent. We further reject the arguments that the class action waiver at issue here is unlawful under the National Labor Relations Act and that the employer in this case waived its right to arbitrate by withdrawing its motion to compel arbitration after Gentry.

When asserting a Labor Code claim in connection with an Unfair Competition Law claim (Business and Professions Code section 17200), the statute of limitations extends back four years. Today’s holding upholds arbitration agreements entered into between employers and employees barring employees from brining any claims on a class wide basis as long as the underlying arbitration agreement is enforceable under California law.

In addition, the Supreme Court reviewed whether an employer could have an employee waive his ability to bring a representative action under the Private Attorneys General Act (PAGA). 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. In holding that arbitration agreements could not limit an employee's right from bringing a representative PAGA claim, the Court explained:

The employee also sought to bring a representative action under the Labor Code Private Attorneys General Act of 2004 (PAGA) (Lab. Code, § 2698 et seq.). This statute authorizes an employee to bring an action for civil penalties on behalf of the state against his or her employer for Labor Code violations committed against the employee and fellow employees, with most of the proceeds of that litigation going to the state. As explained below, 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. In addition, we conclude that the FAA’s goal of promoting arbitration as a means of private dispute resolution does not preclude our Legislature from deputizing employees to prosecute Labor Code violations on the state’s behalf. Therefore, the FAA does not preempt a state law that prohibits waiver of PAGA representative actions in an employment contract.

Because PAGA claims seek to recover penalties, a one year statute of limitations applies. Therefore, even if employers have a class action waiver in an arbitration agreement entered into with an employee, the employee may still assert a representative PAGA action to recover appropriate penalties with a one year statute of limitations on behalf of all aggrieved employees. 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. In a previous post, I’ve written about PAGA claims and what to do in response to receiving a PAGA notice. The California Supreme Court's ruling in Iskanian v. CLS Transportation Los Angeles, LLC can be downloaded here (Word).  This is an initial summary of the holding, and I'll write more about the case as I've had more time to review the opinion in more detail. 

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Friday's Five: Five steps to prevent sexual harassment claims

1. Have a good anti-harassment policy and conduct required training for supervisors.

It is legally required that all California employers provide information to employees regarding harassment. The Department of Fair Employment and Housing provides the following guidelines for employers:

Employers must help ensure a workplace free from sexual harassment by distributing to employees information on sexual harassment. An employer may either distribute a brochure that may be obtained from the Department of Fair Employment and Housing or develop an equivalent document, which must meet the following requirements:
• The illegality of sexual harassment
• The definition of sexual harassment under state and federal laws
• A description of sexual harassment, utilizing examples
• The internal complaint process of the employer available to the employee
• The legal remedies and complaint process available through the Department and the Fair Employment and Housing Commission
• Directions on how to contact the Department and the Fair Employment and Housing Commission
• The protection against retaliation for opposing the practices prohibited by law or for filing a complaint with, or otherwise participating in investigative activities conducted by, the Department or the Commission

Also, since 2005, California employers with more than 50 employees must provide two hours of sexual harassment prevention training to supervisors and managers within six months of hire or promotion, and every two years after that. Completion of the training should be documented in the supervisor’s personnel file.

2. Have a good internal complaint procedure.

Don’t just use some boilerplate in an employee handbook – really think this through. Who should the employees complain to and what different avenues can the company set up to have them complain? This is key in using a defense recognized in California – the avoidable consequences doctrine. This defense was just reaffirmed by a California appellate court and it could limit the damages the plaintiff could receive if they don’t complain under the employer’s complaint procedure.

3. Treat all complaints seriously and perform proper investigations.

It is recommended to have someone who is well-versed in sexual harassment investigations and the law to conduct the investigation. I also recommend that two people be involved in the investigation, this allows one person to ask questions and observe the witnesses’ credibility and the other person to focus on taking notes and documenting the interviews. A good overview of how to conduct an investigation is published at the EEOC’s website here: http://www.eeoc.gov/policy/docs/harassment.html.

4. Investigate complaints immediately.

The longer it takes for a company to start an investigation, the more open the company will be to claims that it did not treat complaints of harassment seriously. Also, the sooner you speak with witnesses and obtain statements, the better everyone’s memory of the events will be.

5. Prevent any form of retaliation from occurring.

Even if you conclude that no harassment took place, but the employee is retaliated against by the manager for making a complaint, the employee would still have a retaliation claim.

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Friday's Five: The World Cup and makeup time under California law. Five requirements for use of makeup time.

The World Cup is upon us. I have to admit I had yesterday’s opening game between Brazil and Croatia on in the background while I was working. Given that this year’s World Cup is being held in Brazil, there is not much of a difference in time zones for those of us on the west coast, but many games are during work hours. So what are California employers’ options to provide employees with time off during the work day to watch their favorite team play? One is the use of makeup time. This option is a rare occurrence under California law in which employers and employees flexibility to adjust their work schedule to accommodate for important life events that come up from time to time, such as, ahem, the World Cup. Makeup time allows employees to take time off and then make it up later in the same workweek, without triggering the obligation for the employer to pay overtime. Here are five things employers should keep in mind about makeup time:

  1. An employee may work no more than 11 hours on another workday, and not more than 40 hours in the workweek to make up for the time off;
  2. The time missed must be made up within the same workweek;
  3. The employee needs to provide a signed written request to the employer for each occasion that they want to makeup time (and if employers permit makeup time, they should have a carefully drafted policy on makeup time and a system to document employee requests);
  4. Employers cannot solicit or encourage employees to request makeup time, but employers may inform employees of this option; and
  5. Remember, if these requirements are not met, time and a half overtime is due for (1) time over eight hours in one day or (2) over 40 hours in one week or (3) the first eight hours worked on the seventh consecutive day worked in a single workweek; and double time is due for (1) time over 12 hours in one day and (2) hours worked beyond eight on the seventh consecutive day in a single workweek.

The DLSE provides a good overview of the overtime requirements and calculating overtime payments here.

Just a reminder, USA’s first match is against Ghana, on Monday, June 16 at 3:00 p.m. Pacific Time.

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Are you ready for the increase in minimum wage? Join us for a mid-year update on employment and corporate issues.

My firm is conducting a webinar on Thursday June 19, 2014 at 10:00 a.m. for a mid-year update on emerging employment law issues and the newly enacted LLC statute effecting most California Limited Liability Companies. 

For more information and to register, please complete the form below:

 

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Five issues California employers should review before the minimum wage increases July 1, 2014

Come July 1, 2014, California’s minimum wage will increase from $8 per hour to $9 per hour for all workers. The minimum wage will increase again to $10 per hour on July 1, 2016. Other than starting to work with their payroll provider to ensure that all hours worked as of July 1 will be paid at the higher rate, here is a list of five other issues California employers should also review in preparation for the wage increase:

1. Review base salary for all exempt employees.
In order to qualify as an exempt employee, which is an employee who is not entitled to receive overtime for work performed over eight hours in one day or 40 hours in one week, the employee must be paid an equivalent of two times minimum wage. Before the minimum wage increase in July 2014, this amount is $33,280 annual salary. When the minimum wage increases to $9 per hour, this amount will increase to $37,440 annual salary, and when the minimum wage increases to $10 per hour, an exempt employee will need to be paid $41,600 annually.  I've discussed this issue in a short video previously, which can be viewed here.  

2. Review compliance with the Wage Theft Protection Act Notice.
Since 2012 every California employer has been required to provide written notices to employees regarding certain information about their jobs, including their wage rate. The good news is that employers will not have to re-issue new wage notices to employees as a result of the increase of minimum wage as long as the new minimum wage rate is shown on the pay stub (itemized wage statement) with the next payment of wages.

3. Review timekeeping system and policies.
With the higher minimum wage rate, there is more potential exposure from wage and hour lawsuits alleging off the clock work or unpaid minimum wage. Companies should remind employees of policies that prohibit off the clock work and about complaint procedures available should anyone ask the employee to work off the clock or the employee not receive all minimum wages.

4. Review classification of independent contractors.
A company that has independent contractors should review the classification to ensure that it can withstand scrutiny from a court, Department of Labor, Labor Commissioner, or the EDD. As employers already face large penalties for misclassifying independent contractors, the potential exposure for unpaid minimum wages as a result of a misclassification will also increase as discussed above.

5. Review wage agreements with employees.
Ensure that all agreements with the employees comply with the law. Under California law, employees cannot agree to work for less than the state minimum wage. This waiver cannot be done through a collective bargaining agreement. All agreements to do so are void under the law.

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Five steps companies can take to reduce employment lawsuits

Employers often ask me the question of what steps can they take to stop employment litigation. My response usually begins with a warning that there is nothing an employer can do that will prevent a frivolous lawsuit. Employers can only control their actions and decisions, and by thinking about and reviewing a few simple items at least once a quarter, it can greatly reduce a company’s liability. Here are five steps employer can start with:

1. Implement accurate and easy to use timekeeping system.
California law requires employers to track start and stop times for hourly, non-exempt employees. The law also requires employer to track the start and stop times for the employee’s thirty minute meal periods. The time system needs to be accurate, and the employer needs to be involved in the installation and setup of the system. Do not simply use the default settings for the hardware and software. Understand what the system is tracking and how it is recording the data. Since the statute of limitations for California wage and hour violations can extent back four years, it is recommended that employers take steps to keep these records at least four years.

2. Keep handbook and related policies up to date.
Employers should periodically have their handbooks, operating policies and new hire packets reviewed to ensure they are current. Employers need to remember that a review of policies should extend beyond the handbook, but should also incorporate a review of all other policies, pay practices, and documents that are given to employees when they are hired, during employment, and at termination.

3. Document everything.
I cannot overemphasis the need to document what occurs in the workplace. Most importantly, employers need to document employee performance. It is all too often that a problem employee’s personnel file does not contain any type of documentation about his poor performance. Then, when the employee challenges the employer’s termination decision, it is much harder to prove the business reason behind the decision.

4. Get to know an employment attorney you can run issues by on a day-to-day basis.
You knew this was coming, but regardless of the unashamed self-promotion, employers should have counsel that is well versed in California employment law. California’s employment laws are very nuanced, and an attorney that has experience in this area will save the company not only in legal fees, but also in potential exposure. I have a client that says that when you have a problem with your eyes, you don’t go to you general practitioner. The same applies for advice on California employment issues. It is very unique. In addition, working with an employment lawyer on a routine basis is also a great way to see how he or she works and if the lawyer is compatible with your operations. This is much better to find out early on, instead of discovering that you don’t get along with your counsel in the middle of defending a class action lawsuit.

5. Consider hiring a knowledgeable HR professional.
An experienced HR professional will allow the president or other executives in the company to focus their time and energy in their core roles. In addition, it is helpful from a structural and managerial perspective for the employees in an organization to know exactly who to go to for HR information or complaints. A human resources professional with experience in handling workplace investigations and dealing with employee complaints is very valuable to a company – let’s face it, no matter how well you run your company, there will be complaints. Having a proactive, knowledgeable professional assisting in the process of investigating and resolving the issues is instrumental to a successful company.

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Five legally required items often overlooked by California employers

Welcome to Friday's 5, a series of posts each Friday of lists of five items in various aspect of California employment law. I hope to keep it informative and interesting, and provide a checklist of sorts for California employers to review various practices and policies. Starting off, here is a list of five items not to be overlooked by California employers:

1. Wage Theft Protection Act Notices To Employees.
California’s Wage Theft Protection Act of 2011 has required every employer in California to provide written notices to employees beginning in January 1, 2012. The law is set forth in Labor Code section 2810.5, and requires private employers to provide all new non-exempt employees with a written notice that contains certain basic information about their employment. The law also requires employers to notify employees in writing of any changes to the information in the notice within seven calendar days of any changes, unless the changes are reflected on a timely wage statement that complies with Labor code Section 226. Employers do not need to notify employees of any changes if the change is provided in another writing required by law within seven days of the changes. The California Labor Commissioner has published a sample notice template that complies with the requirements of the law, which can be viewed here [PDF]. This is an easy form to complete for non-exempt employees, and should be a mandatory document in every employer’s new hire packet.

2. Written commission statements signed by both the employee and employer.
As of January 1, 2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

3. Pregnancy disability leave policy in employee handbook.
For employers with five or more employees, it is mandatory that they have a pregnancy disability leave (PDL) policy. Moreover, if the employer has an employee handbook, it is required to include information about pregnancy leave in the handbook. For more information about PDL under California law, the Department of Fair Employment and Housing provides a summary of basic requirements here.

4. Harassment prevention training for supervisors every two years.
Since 2005, California employers with more than 50 employees must provide two hours of sexual harassment prevention training to supervisors and managers within six months of hire or promotion, and every two years after that. Completion of the training should be documented in the supervisor’s personnel file.

5. California employers must pay visiting out-of-state workers according to California overtime rules.
In Sullivan v. Oracle the California Supreme Court has clarified that California's overtime rules apply to anyone performing work within the state, regardless of their state of residency or how long they may be working in California.

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Introducing Friday's 5 Best Practices for California Employers

I know, I’m the first one to admit things have been pretty dormant here at the California Employment Law Report. It is actually a good sign of my growing practice, but with the increasing list of employers I’ve been advising, the less time I’ve had to write articles and conduct webinars. This will be changing however.

I’m introducing Friday’s 5 Best Practices. Starting this Friday, I will post an article every Friday with lists of five items that are best practices for California employers that I routinely see in defending employment lawsuits. [I have to admit, I stole this idea from Steven Pressfield. He is the author of the War of Art, and the newly released The Lion's Gate and writes Writing Wednesdays blog post every week documenting how a writer can overcome writer’s block, or as he calls it, the Resistance.]

This Friday’s article will discuss the 5 legally required items often overlooked by California employers. Should you have any suggestions for any future articles or areas of review for the Friday’s 5, please don’t hesitate to drop me a note.   

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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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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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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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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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Finding the Next Steve Jobs - Nolan Bushnell

Who was the first person to recognize Steve Jobs’ potential and offer him a job? It was Nolan Bushnell. By the way, Bushnell is also the founder of Atari, co-inventor of the video game Pong, founder of Chuck E. Cheese, and is a serial entrepreneur. Given Bushnell’s track record in business, and having the badge of honor of the first person to hire Steve Jobs is more than enough evidence that managers, CEO’s, and human resources personnel should listen to his thoughts on hiring.

Bushnell’s recently published book, Finding the Next Steve Jobs, sets forth what he refers to as “pongs”, or general flexible rules managers should abide by in order to find, hire, and retain the best and most creative employees. I starting reading the book after I was fortunate enough to meet Nolan at Paul Allen's Living Computer Museum opening in April [see picture - from left to right: Chris Espinosa (Apple's 8th employee), Nolan Bushnell, Bob Frankston (co-creator of VisiCalc), Robert Zaller (co-founder of MITS and co-inventor of the Altair), me, and Eric Zaller]. Bushnell makes some excellent points in regards to finding and hiring the best and most creative employees and provides some examples on how to interview applicants to see their true personalities. The following are a few points Bushnell discusses in the book, and a very good reminder to anyone involved in the hiring process.

Creative employees are arrogant.
Only the arrogant have the strength to push for their ideas. They will continue to push their ideas far past the point any other individual would have relinquished to the pressure to give in or to conform to the “norm.” Arrogance does have its place, it is the vehicle creatives use when their solutions do not match anyone else’s views, which must be the case by definition of being creative. I’ve written before that arrogance can buy a company a lot of lawsuits, especially if a manager or the CEO is arrogant. An arrogant employee cannot create the same level of liability for a company, but they still must proactively be handled and discussed with other the other members of the team. On the other hand, managers and a CEO must be able to manage their arrogance in order to avoid looking like a bully, buying the company a lot of litigation.

Hire creative people and find a position for them. Don’t hire for a position.
Bushnell advocates the idea that a company can find great employees through everyday interactions with people. The truly creative and passionate people will standout, it does not matter what job they are doing, their skills will carry over to their work in any job.

Ignore the applicant’s resume during the interview.
Bushnell also provides some great examples of how to conduct an interview to determine if the applicant is a good fit for the company. He recommends asking applicants about their top ten favorite books, listening to how they describe their life (“The passionless tend to be blamers.”), and asking applicants questions that have no right answers. This allows the interviewer to see how the applicant analyses a problem.

Finding the Next Steve Jobs is a great resource for anyone in the human resources profession, and for anyone who has the responsibility of finding great employees for their company.

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5 compliance issues California employers need to audit at least once a year

Your company has updated its employee handbook, but the work is not over in California. Here are a few reminders of additional steps employers should review after conducting a handbook update and on a periodic basis. Of course this list is not comprehensive, but it comprises of a few items that sometimes take a backseat to the employee handbook update.

1. Ensure wage notice statements are issued and are correct.

Labor Code section 2810.5 requires employers to provide written notice to employees about specific employment items. For example, the law requires that employers provide notice to employees of their rate(s) of pay, designated pay day, the employer’s intent to claim allowances (meal or lodging allowances) as part of the minimum wage, and the basis of wage payment (whether paying by hour, shift, day, week, piece, etc.), including any applicable rates for overtime. The notice must also contain the employer's "doing business as" names, and that it be provided at the time of hiring and within 7 days of a change if the change is not listed on the employee’s pay stub for the following pay period.  The recommended notice published by the Division of Labor Standards Enforcement can be downloaded here.  Also the DLSE publishes frequently asked questions that address many issues regarding the notice here

2. Start Using New Form I-9 By May 7, 2013.

By May 7, 2013, employers will be required to use the new I-9 Form. The new Form I-9 can be downloaded from the U.S. Citizenship and Immigration Services website here. It would be a good time to review the “Handbook for Employers, Guidance for Completing Form I-9” published by the USCIS.

3. Place all commission agreements in writing.

Beginning January 1, 2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

4. Conduct pay stub audit.

Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The law was amended, and as January 1, 2013 it clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request.

5. Ensure all personnel records are maintained properly.

When reviewing which records should be maintained in an employee’s personnel file, it is important to keep in mind why an employer would ever have to produce a personnel file – to support its employment based decisions. Therefore, employers should typically maintain personnel files with the following documents: signed arbitration agreements, sexual harassment compliance records for supervisors, sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments), Wage Theft Protection Act notice, commission agreements signed by both the employer and employee, warnings and disciplinary action documents, performance reviews, documents of any grievance concerning the employee, documents pertaining to when the employee was hired, records pertaining to last day of work and documenting reason for departure from employment.

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Employee's medical marijuana use is not covered by disability laws

An employer is not required to allow employees to use medical marijuana as a reasonable accommodation under California’s Fair Employment Housing Act (FEHA). The California Supreme Court held that it is not a violation of California law for an employer to terminate an employee who tests positive for marijuana, even though the employee was prescribed the marijuana for medical purposes under California’ Compassionate Use Act of 1996.

The case, Ross v. Ragingwire Telecommunications, Inc., addressed the conflict between California's Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users). Ragingwire terminated plaintiff’s employment based on a positive test for marijuana even through the plaintiff provided a doctor’s note explaining that he was prescribed marijuana to alleviate back pains.

The Supreme Court explained that the employer's decision to terminate plaintiff was not illegal:

Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and duties of employers and employees. Under California law, an employer may require preemployment drug tests and take illegal drug use into consideration in making employment decisions. (Loder v. City of Glendale (1997) 14 Cal.4th 846, 882-883.)

Plaintiff’s position might have merit if the Compassionate Use Act gave marijuana the same status as any legal prescription drug. But the act’s effect is not so broad. No state law could completely legalize marijuana for medical purposes because the drug remains illegal under federal law (21 U.S.C. §§ 812, 844(a)), even for medical users (see Gonzales v. Raich, supra, 545 U.S. 1, 26-29; United States v. Oakland Cannabis Buyers’ Cooperative, supra, 532 U.S. 483, 491-495). Instead of attempting the impossible, as we shall explain, California’s voters merely exempted medical users and their primary caregivers from criminal liability under two specifically designated state statutes. Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and obligations of employers and employees.

The Court also provided that a reasonable accommodation, as required under California’s FEHA, does not include an employer’s permission to use illegal drugs:

The FEHA does not require employers to accommodate the use of illegal drugs. The point is perhaps too obvious to have generated appellate litigation, but we recognized it implicitly in Loder v. City of Glendale, supra, 14 Cal.4th 846 (Loder). Among the questions before us in Loder was whether an employer could require prospective employees to undergo testing for illegal drugs and alcohol, and whether the employer could have access to the test results, without violating California’s Confidentiality of Medical Information Act (Civ. Code, § 56 et seq.). We determined that an employer could lawfully do both. In reaching this conclusion, we relied on a regulation adopted under the authority of the FEHA (Cal. Code Regs., tit. 2, § 7294.0, subd. (d); see Gov. Code, § 12935, subd. (a)) that permits an employer to condition an offer of employment on the results of a medical examination. (Loder, at p. 865; see also id. at pp. 861-862.) We held that such an examination may include drug testing and, in so holding, necessarily recognized that employers may deny employment to persons who test positive for illegal drugs. The employer, we explained, was “seeking information that [was] relevant to its hiring decision and that it legitimately may ascertain.” (Id. at p. 883, fn. 15.) We determined the employer’s interest was legitimate “[i]n light of the well-documented problems that are associated with the abuse of drugs and alcohol by employees — increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover . . . .” (Id. at p. 882, fn. omitted.) We also noted that the plaintiff in that case had “cite[d] no authority indicating that an employer may not reject a job applicant if it lawfully discovers that the applicant currently is using illegal drugs or engaging in excessive consumption of alcohol.” (Id. at p. 883, fn. 15.) The employer’s legitimate concern about the use of illegal drugs also led us in Loder to reject the claim that preemployment drug testing violated job applicants’ state constitutional right to privacy. (Id. at pp. 887-898; see Cal. Const., art. I, § 1.)

(footnote omitted).

The plaintiff also alleged a cause of action for wrongful termination in violation of public policy. Generally, at-will employees can terminate or be terminated from their job at any time, but an employer cannot terminate an employee for reasons that violate a fundamental public policy of the state. The Court rejected plaintiff’s position that there was a fundamental public policy that permitted him to use medical marijuana and be under its influence while at work. The Court stated, “Nothing in the [Compassionate Use Act’s] text or history indicates the voters intended to articulate any policy concerning marijuana in the employment context, let alone a fundamental public policy requiring employers to accommodate marijuana use by employees."

A further clarification that medical marijuana use is not protected under disability laws came in 2012 from a Ninth Circuit Court of Appeals that held individuals seeking to stop cities from closing medical marijuana dispensaries under Title II of the ADA were not protected by under the ADA.  The case is James v. City of Costa Mesa, which held that the ADA does not protect against discrimination on the basis of marijuana use, even though permitted under certain circumstances under California law, marijuana use is not authorized by federal law, and therefore is not protected under the ADA. It is therefore likely that a court would also recognize that a patron does not have a right under Title III of the ADA, which applies to public accommodations, to use medical marijuana in public establishments, like restaurants.

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Reminder: Webinar On Social Media Under California Law Tomorrow

This will be one of our most attended webinars, and there is still time to sign up. The webinar will cover legal issues facing California employers under the new Labor Code section prohibiting employers from asking applicants and employees for social media passwords, privacy issues when conducting background checks, alternatives to social media policies, and when policies addressing these issues are necessary. It is taking place at 10:00 a.m. PST January 15. Visit our website for registration information.

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Can California employers monitor employees' internet usage under new Labor Code section 980?

California passed a new law taking effect January 1, 2013 that prohibits employers from “requiring or requesting” employees and applicants to provide their passwords to social media accounts. This law was passed after a few cases made the news where employers were actually asking for this information. As I argued before, this law was probably not necessary as California law probably already prohibited this type of conduct to begin with.

However, now that the law is taking effect, there are also new questions that employers are facing under the law. For example, if an employer has the right policies in place that limit an employee’s expectation of privacy, it is pretty well established that the employer may monitor the employee’s internet use and record this. However, under the new law, what if an employee accesses their social media accounts during work? Or on a break? Can employers still monitor employees and record the employee’s login and password information?

I would argue that employers can still monitor employees’ internet use as long as they have made the proper disclosures through a handbook or policies that limit the employees’ expectation of privacy in using the company network or computers. The new law only prohibits employers from requiring employees to divulge their passwords. If the employer notifies the employees that it is recording all activity by the employees on the company network or computers, then the employees have made a voluntary decision to continue to access their account knowing that their employer is monitoring and/or recording the activity. Granted, the law is just going into effect next week, so obviously there is no case law to rely upon in making this argument, so employer will have to wait to see how the law is ultimately interpreted by the courts. 

[image: topgold]

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Zuckerberg's lesson in online privacy - does it exist?

There was a good reminder to everyone over Christmas about online “privacy.” Randi Zuckerberg, the sister of Facebook co-founder and CEO Mark Zuckerberg posted a picture of her and her family on FB, and it was shared by another person on twitter. The photo was one of the Zuckerberg family using Facebook’s new Poke functionality (which by the way, is a way to send pictures through Facebook that are deleted from the recipient’s machine after a set period of time). A third party posted Randi’s photo online, and Randi’s apparently did not like the fact that the photo was reposted. Randi did not know how the third party got a copy of the picture, but it became apparent that the third party was connect to Randi through a mutual friend and saw the picture posted in her newsfeed. After the issue of how the picture was shared and it was not the result of some underhanded means to gain access to the picture, Randi still commented that people should “always ask permission before posting a friend’s photo publicly.”

I think there is another lesson here that I’ve preached about before: everything you post on the internet is public – even if you think you are only sharing it with your “friends.” However, there is a dichotomy of views that is becoming more apparent. Even though posting items on the internet makes them public to a lot of people to see – maybe even more people than you imagine as Randi’s case shows – there is still an increasing sense that people have a privacy interest in their information posted on the internet. For example, California’s new law (Labor Code section 980) making it illegal in a couple of days for employers to ask applicants or employees for their social media passwords in order to conduct a background check on the applicant/employee. This is also apparent in Randi’s comment that her picture, posted on Facebook and which her “friends” could see, still thought she has some privacy expectation in the photo. Mathew Ingram at Gigaom believes that privacy online is becoming more complicated. I have to agree – with laws being passed like California’s law prohibiting employers from asking for social media passwords, what could be considered private online is becoming more complex.

[image: marsmet481]

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Everything Employers Need To Know About Social Media In the Workplace In 2013

I will be conducting a webinar on January 15, 2013 on legal issues of social media in the workplace. The presentation will cover everything a California employer needs to know about social media in the modern workplace of 2013:

  • Discussion on the new law (Labor Code section 960) that prohibits employers from asking applicants and employees for their social media passwords taking effect on January 1, 2013.
  • How to avoid invading employees’ privacy rights when using social media for background checks.
  • Developments on how the NLRB held that some social media policies restrict an employee’s right to “engage in concerted activities.”
  • How to use the Internet to properly conduct a background check for applicant.
  • Discussion on whether your company needs a social media policy.
  • Evaluating whether an employer may be held liable for failing to use social media and the Internet to conduct a background check.
  • Alternatives to social media policies.

The cost is $150 (this is waived for clients). You may register below, or send me an email if you are a client.

This webinar has been preapproved by HRCI for 1 recertification credit hour. 

"The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute's criteria to be pre-approved for recertification credit."

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Seminar - Restaurant Management: Operations, Systems & Financial Controls

I wanted to let readers know that a friend of the firm, Krost, Baumgarten, Kniss & Guerrero will be hosting a restaurant seminar at the Roosevelt Hotel in Hollywood for restaurant operators.  The seminar covers invaluable and informative topics such as restaurant financial analysis, profit and loss systems, tax issues, menu analysis, payroll controls, and upcoming trends in the industry.  It is a great way for operators to learn how to become more profitable in the restaurant industry.  More information about the event can be found here (PDF)

Time: Monday January 28, 2013 beginning at 9 a.m. to 5 p.m.

Readers of the Employment Law Report are eligible to receive a discount of $25 per person.  To register, contact Daryle at Krost, Baumgarten, Kniss & Guerrero. 

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Surprise - Employers Face New Employee Personnel Records Obligations in 2013, But The Term "Personnel Records" Is Not Defined

California employers face a law (AB 2674) taking effect on January 1, 2013 (click here for a list of other new employment laws effective in 2013), which changes their duties to maintain and provide personnel records to current and former employees.  The law amends Labor Code section 1198.5 pertaining to "personnel records".  When discussing this new law, I am getting the question of what documents should be included in an employee’s personnel file, and what exactly are "personnel records" under this Labor Code provision. To many employers' surprise, although the term “personnel file” or “personnel records” is used throughout the Labor Code, the term is never explicitly defined.

The Labor Code provides some guidance for employers by setting for what employees are not entitled to inspect. Labor Code section 1198.5, which provides the employee with certain rights regarding inspection of “personnel records”, does exclude certain records from this right to inspection. Under this section, employees do not have the right to inspect (1) records relating to the investigation of a possible criminal offense; (2) letters of reference; (3) ratings, reports, or records that were: obtained prior to the employee’s employment, prepared by identifiable examination committee members, or obtained in connection with a promotional examination.

Without the terms “personnel records” or “personnel file” ever being defined, there is considerable ambiguity about what documents should be keep in an employee’s personnel file.

While not legally binding on employers, there is some guidance from the Division of Labor Standards Enforcement’s (“DLSE”) website (caution: at the time of this writing, the DLSE has not updated its website to reflect the new changes in the law):

Categories of records that are generally considered to be "personnel records" are those that are used or have been used to determine an employee’s qualifications for promotion, additional compensation, or disciplinary action, including termination. The following are some examples of "personnel records" (this list is not all inclusive):

  1. Application for employment
  2. Payroll authorization form
  3. Notices of commendation, warning, discipline, and/or termination
  4. Notices of layoff, leave of absence, and vacation
  5. Notices of wage attachment or garnishment
  6. Education and training notices and records
  7. Performance appraisals/reviews
  8. Attendance records

It is important to keep in mind why an employer would ever have to produce a personnel file – to support its employment based decisions. Therefore, employers should typically maintain personnel files with the following documents:

  • Signed arbitration agreements
  • Sexual harassment compliance records for supervisors
  • Sign acknowledgements of policy by employee (for example, confidentiality/proprietary information agreements, meal and rest break acknowledgments, handbook acknowledgments)
  • Wage Theft Protection Act notice
  • If commissioned employee, written commission agreement signed by both the employer and employee beginning January 1, 2013.
  • Warnings and disciplinary action documents.
  • Performance reviews
  • Documents of any grievance concerning the employee
  • Documents pertaining to when the employee was hired
  • Records pertaining to last day of work and documenting reason for departure from employment

Employers typically should not keep the following information in an employee’s personal file:

  • Form I-9s
  • EEOC and DFEH charges of discrimination
  • Workers’ compensation information
  • Private medical information
  • Any information obtained prior to offering the employee a position

Given the ambiguity about the definition of personnel file, employers should take time to consider their operations and industry to develop a system ensures the same documents for each employee are maintained in their personnel files, and what other files need to be established for employees. Also, employers need to design and implement a personnel file retention policy that will maintain the critical documents that would be relevant should the need to defend an employment claim arise. It is important that this process be established in order to survive any potential change in management and/or the human resource functions in the company.

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New Laws Facing California Employers In 2013

There are some significant changes regarding California employers’ duties in 2013. This list is an overview of the major changes that employers should consider and be aware of at the beginning of 2013.  

Employers Cannot Ask Applicants Or Employees For Social Media Passwords – AB 1844
This law created Labor Code section 980, which is effective 1/1/2013. The law prohibits employers from asking employees or applicants for passwords to their social media accounts, accessing their accounts in the presence of the employer, or divulging any personal social media. There are two exceptions to this: (1) if the request is made to a current employee as part of an investigation of allegations of employee misconduct or violation of law, and the request is based upon a reasonable belief that the information is relevant, and (2) to devices issued by the employer.

Commission Agreements Must Be In Writing – AB 1396 and 2675
Beginning 1/1/2013, when an employee is paid commissions, the employer must provide a written contract setting forth the method the commissions will be computed and paid. The written agreement must be signed by both the employer and employee. Commission wages are “compensation paid to any person for services rendered in the sale of such employer’s property or services and based proportionately upon the amount or value thereof.” Commissions do not include (1) short-term productivity bonuses, (2) temporary, variable incentive payment that increase, but do not decrease, payment under the written contract, and (3) bonus and profit-sharing plans, unless there has been an offer by the employer to pay a fixed percentage of sales or profits as compensation for work to be performed.

Breastfeeding is added to definition of “sex” under the Fair Employment and Housing Act - AB 2386
The new law clarifies that the definition of sex under the FEHA includes breastfeeding and any medical conditions relating to breastfeeding. This amendment makes breastfeeding and the related medical conditions, a protected activity and therefore employers cannot discriminate or retaliate against employees on this basis under California law. While the amendment is effective 1/1/13, the law states that the amendment simply is a statement of existing law, and therefore employers should treat this amendment as existing law immediately.

New Religious and Dress Standards – AB 1964
The new law clarifies that religious dress and grooming practices are protected under FEHA. The law explains that “religious dress practice” is “shall be construed broadly to include the wearing or carrying of religious clothing, head or face coverings, jewelry, artifacts, and any other item that is part of the observance by an individual of his or her religious creed.” The law continues in defining religious grooming as: “Religious grooming practice shall be construed broadly to include all forms of head, facial, and body hair that are part of the observance by an individual of his or her religious creed.” The law also states that it is not a reasonable accommodation it the action requires segregation of the individual from the public or other employees.

Changes in Calculating Employees’ Regular Rate of Pay – AB 2103
The new law revises Labor Code 515(d) to clarify that “payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any private agreement to the contrary.” Therefore, overtime must be paid above any nonexempt employee’s agreed upon salary. This law was in response to the court opinion in Arechiga v. Dolores Press. The legislature history described the opinion in Arechiga as follows:

In the Arechiga case, a janitor and his employer agreed that payment of a fixed salary of $880 a week would provide compensation for 66 hours of work each week. The Court of Appeal held that this method of payment comported with California overtime law, and that no additional overtime compensation was owed. The Court rejected the employee's contention that existing Labor Code Section 515(d) prohibits any sort of agreement that would allow a fixed salary to serve as a non-exempt employee’s compensation for anything more than a 40 hour workweek.

New Penalties For Violations On Itemized Wages Statements – SB 1255
The new law provides that employees are deemed to have suffered injury for purposes of assessing penalties pursuant to Labor Code 226(a), if the employer fails to provide accurate and complete information. Furthermore, a violation occurs if the employee cannot easily determine from the wage statement alone the amount of the gross or net wages earned, the deductions the employer made from the gross wages to determine the net wages paid, the name and address of the employer or legal entity employing the employee, and the name and only the last 4 digits of the employee.

New Requirements On Retention And Inspection of Itemized Wage Statements and Personnel Files– AB 2674
Under Labor Code 226, employers must keep copies of employees’ itemized pay statements for at least three years, at the site of employment or at a central location within the state of California. The new law, effective 1/1/13, clarifies that the term “copy” means either a duplicate of the statements provided to employees, or a computer generated record that shows all information required under Labor Code 226. In addition, the law sets a new deadline for employers to either provide a copy or permit the employee to inspect the personnel file within 30 days after the employer receives the request. The employer and employee may only agree to extend this time period out to 35 days. The employer may also redact the names of any non-supervisory employees in the file. It is important to note, this requirement does not change the 21 day time period to produce or make available for inspection an employee’s itemized wage statements under Labor Code 226(c).

Itemized Wage Statements And Wage Theft Notices For Temporary Service Employers – AB 1744
This new law requires temporary service employers to provide wage statements that list the rate of pay and total hours worked for each temporary assignment. A “temporary service employer” is defined in Labor Code 201.3(a)(1) as a company that contracts with customers to supply workers to perform services for the customer. This is effective 7/1/2013. Furthermore, the law requires temporary services employer to provide Wage Theft Notices required under 2810.5 and include additional information regarding the name, the physical address of the main office, the mailing address if different from the physical address of the main office, and the telephone number of the legal entity for whom the employee will perform work, and any other information the Labor Commissioner deems material and necessary. This requirement is effective on 1/1/2013.

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Reminder To Carefully Draft Executive Agreements - Faigin v. Signature Group Holdings, Inc.

The judgment against the defendant for $1,347,000 in Faigin v. Signature Group Holdings, Inc. should be a good reminder for companies to have well drafted executive agreements. Faigin worked as General Counsel and Chief Legal Officer for Fremont General, a parent corporation. Defendant had various subsidiary companies that Faigin also worked for during his employment. Faigin entered into an employment contract with Fremont General. The agreement set forth that Faigin would be entitled to certain benefits if he was involved in an “involuntary termination.” If he was involuntarily terminated, as defined in the agreement, the company agreed to pay Faigin a lump sum equal to three years of his base salary.

After entering into the agreement with Fremont General, Faigin was appointed to interim President and Chief Executive Officer of FRC, a subsidiary of Fremont General. A short time after assuming these roles, Faigain was replaced at FRC. Faigin argued that his dismissal from his roles at FRC resulted in an involuntary termination under the term of his employment contract, entitling him to three years of his salary which exceeded $400,000 per year.

At trial, FRC argued that the employment agreement entered into with Fremont General did not apply to the situation arising out of Faigin’s employment with FRC because the agreement was only entered into with Fremont General, not FRC. The trial court agreed, and excluded any evidence of the employment agreement between Faigin and Fremont General. However, Faigin presented evidence that FRC created an implied-in-fact employment contract that he would only be terminated for good cause. As the court noted, an implied-in-fact employment contract can be established by showing the following:

The existence and content of such an agreement are determined from the totality of the circumstances, including the employer’s personnel policies and practices, the employee’s length of service, actions and communications by the employer reflecting assurances of continued employment, and practices in the relevant industry. The question whether such an implied-in-fact agreement exists is a factual question for the trier of fact unless the undisputed facts can support only one reasonable conclusion.

An implied-in-fact agreement to terminate only for good cause cannot arise if there is an express writing to the contrary, such as a written acknowledgement that employment is at will or an at-will provision in a written employment agreement. “There cannot be a valid express contract and an implied contract, each embracing the same subject, but requiring different results. [Citations.]”

(Citations omitted). The court stated that because the employment agreement with Fremont General fixed the term of employment at three years and did not provide that Faigin’s employment was at-will, this written agreement is not inconsistent with the jury’s finding of an implied-in-fact agreement existed.

The case shows how careful employers need to be in drafting executive compensation agreements, and especially if the executive is working for different subsidiaries of a parent company.

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Health Care Reform and The Affordable Care Act - Webinar

It is time to start planning for how the Patient Protection and Affordable Care Act, otherwise known as ObamaCare, will effect your business.  Peterson Milaney Associates, will be hosting a webinar on the new law and what employers need to start planning for now.  The webinar is taking place on Monday, December 3, at 10:00 a.m. 

The webinar is free for readers of the blog.  Registration is here

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Can California Labor Code Provisions Apply To Non-resident Employees Working in California?

Given the increasing mobility of the workforce, the issue of which state’s laws apply to a traveling employee is becoming more and more common. In Sullivan v. Oracle Corp., the California Supreme Court held that California-based employers must pay non-resident employees working in California according to the California’s overtime laws. That means that a California employer who has employees travel to California to work must pay the employees according to California’s wage and hour laws – not pursuant to the laws from the state that the employee is from. The Court emphasized California’s strong public policies in place to protect the employees.

This holding was again recognized in See’s Candy Shops, Inc. v. Superior Court. The Court in See’s Candy stated, “We agree with [the Plaintiff] that under Sullivan a California employer generally must pay all employees, including nonresident employees working in California, state overtime wages unless the employee is exempt.” While the issue in See’s Candy was whether an employer’s time-keeping rounding policy complied with California law, the case is a good reminder that the analysis of which state’s employment laws apply to employees is simply more than looking up where the employee live.

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Proposed Bill Gives NLRB And OSHA Right To Review Emails And Other Electronic Information Without Search Warrant

There is concern about a bill making its way through the Senate that would drastically change individuals’ privacy interest in their internet communications and “cloud” information. The bill, named the Electronic Communications Privacy Act Amendments Act of 2011, originally started out as offering more protection to individuals, but after law enforcement expressed its concerns about the bill, it was rewritten to allow more than 22 governmental agencies to search e-mail, Google Docs files, Facebook posts, and direct messages through Twitter. 

Other than lowering everyone’s privacy rights in this information, why would employers have any concern about the bill? The National Labor Relations Board (NLRB) is one of the governmental agencies expressly listed as having the power to search this electronic information without a search warrant. In addition the Occupational Safety and Health Administration (OSHA) would also have the warrantless subpoena power should the bill pass.  This would give the NLRB and OSHA unprecedented access into a private employer's e-mails and any other information stored in the cloud. 

Under the bill, anyone who sends email or stores information in the cloud would be given less privacy than if the information was stored on a hard drive kept in the office or home. Many companies, such as Google and Apple, who are touting new cloud services are fighting hard to protect the information individuals store in the cloud because a decrease in privacy of cloud based information would likely reduce the consumer demand for the services.

Further diminishing companies’ and individuals’ privacy rights, there has been an argument which was upheld by a federal district court in Oregon in 2009, that the government does not have to give notice to the individual or company to search e-mails or other electronic information, even when the agency has a search warrant. The court held that the notice requirements under the Electronic Communications Privacy Act (ECPA) and the Fourth Amendment is satisfied when the only the internet service provider who is storing the information is served with a search warrant.

The vote on the proposed bill is scheduled for Thursday, November 29, 2012.

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NLRB Issues New Memo On Validity of Social Media Policies

In October 2012 the National Labor Relations Board issued an advice memorandum regarding whether an employer’s social media policy violated the National Labor Relations Act (“NLRA”). This memorandum is of importance because the NLRB has issued findings recently that employer’s seemingly neutral social media policies violated employees’ rights under the NLRA. Section 7 of the NLRA provides that employees have the right to self-organize, form, join or assist labor organizations, and generally “engage in other concerted activities.” Section 8 of the NLRA makes it unlawful for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.” This prohibits applies to all employers, even if the employees are not unionized.

In the memorandum the NLRB sets forth its two step analysis in determining whether a “work rule” “would reasonably tend to chill employees in the exercise of their Section 7 rights.” First, the NLRB examine whether the rule “is clearly unlawful if it explicitly restricts Section 7 protected activities.” Second, the rule is examined to determine if “(1) employees would reasonably construe the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule has been applied to restrict the exercise of Section 7 rights.” While the Board said that a rule “that could conceivably be read to restrict Section 7 activity” would does not automatically violate the NLRA, but if the rule is ambiguous and contains no limiting language or context to clarify that it does not restrict their Section 7 rights would be in violation.

The case at issue in the memorandum involved Cox Communications. The company had a standard social media policy:

Nothing in Cox’s social media policy is designed to interfere with, restrain, or prevent employee communications regarding wages, hours, or other terms and conditions of employment. Cox Employees have the right to engage in or refrain from such activities. . . .

DO NOT make comments or otherwise communicate about customers, coworkers, supervisors, the Company, or Cox vendors or suppliers in a manner that is vulgar, obscene, threatening, intimidating, harassing, libelous, or discriminatory on the basis of age, race, religion, sex, sexual orientation, gender identity or expression, genetic information, disability, national origin, ethnicity, citizenship, marital status, or any other legally recognized protected basis under federal, state, or local laws, regulations, or ordinances. Those communications are disrespectful and unprofessional and will not be tolerated by the Company. . .

DO respect the laws regarding copyrights, trademarks, rights of publicity and other third-party rights. To minimize the risk of a copyright violation, you should provide references to the source(s) of information you use and accurately cite copyrighted works you identify in your online communications. Do not infringe on Cox logos, brand names, taglines, slogans, or other trademarks.

An employee was fired for violating this policy by posting an offensive and derogatory comment on his Google+ account via his cell phone. The company suspended the employee and conducted a further investigation, which revealed that the employee made numerous other posts “containing lewd language which disparaged customers.” The company terminated the employee.

Applying the analysis above to Cox Communication’s social media policy, the NLRB found that the policy did not violate the NLRA. The Board said that the examples of egregious conduct listed in Cox Communication’s policy established a context that “clearly would not be reasonably understood to restrict Section 7 activity.” Also, the policy’s savings clause that specifically set forth that it was not designed to violate any communications employees had the legal right to make, also supported the finding that it did not violate Section 7.

The NLRB memorandum can be read here (PDF)

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Court Upholds Timekeeping Rounding Policies: See's Candy Shops Inc. v. Superior Court

In See’s Candy Shops, Inc. v. Superior Court the court addressed whether an employer’s policy of rounding  employee’s time clock entries to the nearest tenth of an hour.  See’s Candy’s policy rounded employees’ time entries either up or down to the nearest tenth of an hour in its Kronos time keeping system. For example, if an employee clocked in at 7:58 a.m., the system rounds the time to 8:00 a.m., and if the employee clocked in at 8:02 a.m., the system rounds down the entry to 8:00 a.m.

Plaintiffs challenged this rounding policy by arguing that this policy prevented employees from receiving all of their wages twice a month as required by California law. The court noted that even though California employers “have long engaged in employee time-rounding, there is no California statue or case law specifically authorizing or prohibiting this practice.” See’s Candy argued that given this lack of clear authority on the issue, courts should adopt the federal standard, which is also used by California’s Division Labor Standards Enforcement (“DLSE”), which allows rounding.

The court agreed that time entry rounding is permissible under California law:

Relying on the DOL rounding standard, we have concluded that the rule in California is that an employer is entitled to use the nearest-tenth rounding policy if the rounding policy is fair and neutral on its face and ‘it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.’ (29 C.F.R. § 785.48; see DLSE Manual, supra, §§ 47.1, 47.2.)

See’s Candy presented evidence that across all of its employees the rounding policy actually resulted in a total gain of 2,749 hours for the class of employees involved in the litigation. Therefore, the court held that the rounding policy that rounded both up and down from the midpoint of every six minutes did not result in a loss to the employees.

It is important to note the limitation of this holding. This case involved clear evidence, presented in the form of an expert witness, establishing the effect on the total time paid to the employees did not result in a loss to the employees. Also, the rounding policy would round both up and down. Had the policy only rounded in favor of the employer, that would have violating the rule established in this case. Employers utilizing rounding for payroll must still do so with caution. For example, there should be periodic audits to ensure the effect of rounding does not favor the employer over a period of time. The opinion can be read here: See's Candy Shops, Inc. v. Superior Court.

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Chris Sacca - Bold Humility

I had the opportunity to attend an event with Chris Sacca last night.  He is a venture capitalist who has been living part-time in Los Angeles recently. He spoke about how he grew up in the investment scene in Silicon Valley. He got his feet wet in investing when he started day trading law school student loan money. By day trading, he was able to grow his net worth to $12 million. Then the bubble burst and he lost his friends’ and family’s money, and owed $4 million himself. Given that he wanted to be in the investment scene and possibly run a publicly traded company, bankruptcy was not an option. Chris began working as a corporate lawyer in Silicon Valley and worked odd jobs at night to pay back the money he owed (which he was able to negotiate down to a little more than $2 million). When he was laid off as a lawyer, he quickly had to adapt, and realized that no one wanted to work with a young guy working out of his house. He formed the Salinger Group (I use the term “formed” loosely - he just made up the name and thought it sounded good and that people would trust the name). He successfully worked his way through a number of companies, including Google and eventually became a venture capitalist. He now runs Lowercase Capital.

Here are a few points Chris made that stood out from his interview:

  • The startup scene in Los Angeles is alive and well. In fact Chris has raised a fund to invest in companies in Los Angeles.
  • Chris spoke about the sense of entitlement the younger generation has. This has turned him off of seed funding, as the entrepreneurs were insisting on a very high valuation of the company and requiring an investment decision on the spot.
  • Everyone needs to believe in themselves and that everyone has one thing they are good at. Chris encouraged everyone that when they are good at something, to not apologize about it, but still keep in mind that everyone can still use some help every now and then. He described his theory as “bold humility.”
  • Good entrepreneurs recognized they need money, and it is an important aspect of working, but more fundamentally, good entrepreneurs keep working because they like solving problems. That is why he is still working.
  • Successful leaders do not surround themselves with “yes men.” He learned this lesson when he made $12 million day trading. Everyone around him was telling him what a genius he was, and he said he actually started to believe it. Then the market corrected, and he realized that much of the success he had was due to his timing of the market.
  • He buys his trademark cowboy shirts from www.vintagewesternwear.com

It was a great event hosted by Zefr, who provided the room, beer and pizza. More about it can be read at PandoDaily. It was great to see the startup scene in Los Angeles alive and well.

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Silicon Valley Companies Sued Over Agreements Not To Hire Competitor's Employees

Were Silicon Valley companies artificially keeping wages lower by having an agreement not to poach employees from competitors? This issue came to a head in 2010 when the Department of Justice settled an antitrust case with Adobe, Pixar, Google, Apple, Inuit, and Intel. The DOJ alleged that the companies had agreement not to poach each other’s employees, and that these agreements “reduced their ability to compete for high tech workers and interfered with the proper functioning of the price-setting mechanism that otherwise would have prevailed in competition for employees.” In the settlement with the DOJ, the companies agreed to discontinue the use of any agreements that would prevent any company from poaching employees from a competitor.

After knowledge of the DOJ case spread, a group of employees filed a class action lawsuit seeking damages by alleging that the companies violated California’s Cartwright Act and the Unfair Competition Law. The case is currently pending in California’s Federal Northern District Court. The allegations made in the DOJ case and in the class action litigation argue that the companies had a “do not call” list. Under this agreement the companies agreed not to cold call each other’s employees. There have been emails disclosed in the litigation where Steve Jobs emailed Eric Schmidt asking Google to stop its employee from soliciting an Apple employee. When Schmidt informed the Google employees to stop, the Google employees responded that this was inappropriate, and the offender would be fired within the hour.

This litigation shows how valuable a company’s employees are to its productivity and how hard it is to retain employees in competitive industries. It also shows the relatively few methods employers have to retain top talent. Generally speaking, noncompetition agreements are unenforceable in California, and the allegations made in this litigation show that agreements not to poach competitor’s employees can also be challenged as violating anti-trust and unfair competition laws.

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Inside Litigation Over Social Media Accounts - Why Employers Should Have Social Media Policies - Part I

As previously written about on this blog, the case PhoneDog v. Kravtiz is one of the first cases in the country to deal with substantive ownership issues arising out of social media accounts used in the workplace. As companies are moving more and more away from traditional marketing and advertising towards the use of social media, it is critical that companies have an agreement with employees about a few key items regarding social media accounts, such as ownership of the social media accounts.

On the other hand, the rise social media has given individuals the ability to create a brand for themselves and establish a large following for their expertise. These individuals are hired by companies not only for their expertise on the subject matter, but also for the large group of followers they developed via social media. The followers the individuals have through Twitter, Facebook or a blog is a valuable advertising and marketing resource for a company that wishes to gain the follower’s attention. Because of this shift from traditional advertising and PR, employers and employees have to be vigilant in approaching this issue given the potentially large value social media contacts can now have in the marketplace. An employee being hired who agrees to use their social media accounts to promote the company’s business should also clearly set out at least a few issues in a written agreement.

For example, a social media agreement between and employer and employee could address at the following issues:

  • Ownership of the employee’s social media accounts that will be used for business purposes. Clearly spell out who owns the accounts (or license to use the accounts).
  • Ownership and use of the company’s social media accounts. Who retains the right to change the passwords? Who retains the right to edit and approve content? What is the process to approve content prior to publishing?
  • Any restrictive terms of use of the employee’s social media accounts during employment. For example, does the employer have the right to edit and review the content prior to publication?
  • What control, if any, the company will have after the termination of the employment relationship over the employee’s or the company’s social media accounts. Is there a time frame after employment that the employee cannot use his or her own social media accounts for competitive business uses? Employers need to be careful here, however, as limiting an employee’s use of their social media accounts may be tantamount to a prohibited non-competition agreement or in violation of other state laws. I expect that this will be another hot area of the law that will be addressed by the courts within the next few years.
  • It may also be useful to set a monetary value on the social media accounts. This is probably easier to negotiate among the parties prior to any dispute over the value should litigation arise later.

My next article, Part II of this series, will address what claims employers and employees would likely use during litigation over social media accounts.

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When Does An Employer Have To Pay Wages?

I remember working odd summer jobs during college to pay the rent so that I did not have to move home. I was just thinking about one employer I worked for that always seemed to have payroll issues. Now, I do not think the mistakes were intentional, but they did cause me to have a few hard times coming up with rent when I had to complain and get my correct pay. With the closing few weeks of summer upon us, I thought it would be a good time to review a few requirements under California law when employers must pay wages.

Normal Payroll Deadlines

California law requires that employers pay employees at least twice during each calendar month. Paydays must be designated by the employer and posted at the worksite, as required under Labor Code 207. Labor Code section 204 requires the following:

  • Wages earned between the 1st and 15th of the month must be paid no later than the 26th day of the month work was done.
  • Wages earned between the 16th and last day of the month must be paid by the 10th of the following month.

If the employer pays on a different basis, such as weekly, every two weeks, or twice a month, when the pay period is something other than the 1st to the 15th and the 16th to the end of the month, then the employee must be paid within seven calendar days of the end of the of the payroll period. See Labor Code section 204(b).

Pay Due Upon Termination or Resignation

An employee who is terminated must be paid all wages and accrued vacation at the time of termination. Labor Code section 201. An employee who quits without giving more than 72 hours of notice, must be paid all wages and accrued vacation within 72 hours of quitting. Labor Code section 202. An employee who quits, but gives 72 hours of notice before quitting, must be paid at the time of quitting.

The penalty for non-compliance with Labor Code sections 201 and 202 provides that the employee is entitled to the amount of wages he or she would have continued to earn at their normal rate for each day that the employer does not pay the wages. These penalties accrue up to 30 days’ worth of wages. Labor Code section 203.

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Does the Company or the Employee Own a Twitter Account?

Imagine you are an employer and your employee in charge of your social media accounts leaves, keeps the accounts, and begins using the accounts while working for a competitor. Conversely, imagine you are an employee, leave employment to work for a competitor and your former employer sues you for $350,000 because you refuse to stop using your social media accounts. These issues are at play in PhoneDog v. Kravitz. The case illustrates the complicated issues surrounding exactly who owns social media accounts that are used for work. Noah Kravitz worked for PhoneDog as a product reviewer and video blogger. He had a Twitter account “@PhoneDog_Noah” he used as one way to publish product reviews as part of his job at PhoneDog. PhoneDog asserts in the lawsuit that it issues its employees Twitter accounts in the form of “@PhoneDog_[name]”. PhoneDog alleges that all of these Twitter accounts are proprietary, confidential information. Kravitz used the account while he was employed at PhoneDog, and garnered 17,000 Twitter followers.

When Kravitz left employment with PhoneDog to join a competitor, PhoneDog asked him to stop using the Twitter account. It is alleged in the lawsuit that Kravitz refused, changed the Twitter account handle to “@noahkravitz” and then continued to use the account and maintain the Twitter followers.

In response, PhoneDog filed a lawsuit against Kravitz for (1) misappropriation of trade secrets; (2) intentional interference with prospective economic advantage; (3) negligent interference with prospective economic advantage; and (4) conversion. Currently, the Court has ruled that PhoneDog’s lawsuit may proceed at this point, but Kravitz has raised some valid points that may be a defense, but still need to be developed further in litigation. 

Kravitz maintains that there cannot be a claim against him for misappropriation of trade secrets because the Twitter account followers are not a secret, as anyone on Twitter can see who the followers are. Kravitz also argues that the password to the Twitter account is not a trade secret, as PhoneDog does not derive any economic benefit from the password itself – it simply allows the user to see public information. Kravitz was also the person who created the password, not PhoneDog, so there is no PhoneDog secret at issue here. Most interestingly, Kravitz argues that PhoneDog does not have a claim against him for misappropriating the account because the Twitter account is not owed by PhoneDog. Twitter’s Terms of Service specifies that all accounts are the exclusive property of Twitter, that Twitter has the right to “reclaim usernames without liability” to the users, and Twitter retains the right to terminate accounts.

The employer is not without its share of arguments as well. While Kravitz raises some interesting technical issues about who owns the Twitter account, PhoneDog would have a strong argument that the license issued by Twitter is really the property at issue. PhoneDog could argue that because the license granted by Twitter to Kravitz was done during Kravitz’ employment and he set up the account at the request of PhoneDog, this license actually belongs to PhoneDog. Some not so well known California Labor Code provisions strongly support PhoneDog’s argument.  For example, Labor Code section 2860, states:

Everything which an employee acquires by virtue of his employment, except the compensation which is due to him from his employer, belongs to the employer, whether acquired lawfully or unlawfully, or during or after the expiration of the term of his employment.

Furthermore, Labor Code section 2863 provides:

An employee who has any business to transact on his own account, similar to that entrusted to him by his employer, shall always give the preference to the business of the employer.

This fascinating case raises many interesting issues, and will not be the last time I blog about the issues it raises.  It is a good reminder that the creation and maintenance of social media accounts is a critical factor in the employment context today and needs to be addressed from both the employer's and employee's perspectives.

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Why Start-up Managers Cannot Afford To Be Like Steve Jobs

I don’t have any personal knowledge of how Steve Jobs was as a manager, but every account I read of him was that he was demanding and in your face. While this can be an effective management style of some, it does come with some associated costs.

Increased litigation costs
Unless your start-up has a huge backer and litigation budgets are not a concern, being a demanding manager that only says what is exactly on your mind when it comes into your mind may get good results, but it will also invite litigation. Don’t get me wrong, there is nothing illegal about being a demanding manager at work, but a lot of people probably don’t understand that. Also, over 20 states have proposed legislation to make bullying in the workplace illegal, but none of these attempts have become law - yet. Plus, even if the employee understands it is not illegal behavior, it creates an environment where the employee wants to get even with a manager or founder for how they were treated. This leads them to talk to a lawyer, which may lead to a lawsuit based on some other ground. Even if a lawsuit filed against a company is frivolous, it will take time and money away from what the company is supposed to be doing. This can cause a huge stress on a start-up company.

Good employees have options
If you treat your superstars badly, they know they will find another comparable job in this economic climate. Jobs and Apple created an environment where only the best work from everyone was tolerated. Jobs said that this helped the company maintain its “A” players because they did not have to be around B or C players. While I can see this rational, unless the company is Apple with an existing reputation, a lot of employees will not put up with an over demanding, unfriendly workplace. And many talented employees left Apple because they did not like Jobs’ style. The loss of good employees (who probably go to work for a competitor) asserts a huge cost on a start-up.

It still comes down to management style choices. But the choice to be like Jobs will have a cost associated with it. And if the company is a start-up, these costs may not be worth the perceived benefits.

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What is a Split Shift?

 A split shift is defined in the California IWC Wage Orders as:

…a work schedule, which is interrupted by non-paid non-working periods established by the employer, other than bona fide rest or meal periods.

See Cal. Code Regs., tit. 8, § 11040, subd. 2(Q). If the employee works two shifts separated by more than a rest or meal period, they are entitled to receive one hour’s of pay at the minimum wage rate in addition to the minimum wage for that work day. See Cal. Code Regs., tit. 8, §11040, subd. 4(C). Any additional amounts over minimum wage paid to the employee can be used to offset the split shift pay due to an employee. For example, say an employee earns $10 per hour. She works 10:00 a.m. to 1:00 p.m., and then again from 3:00 p.m. to 8:00 p.m. This is a total of eight hours worked for the day, and she is entitled to a split shift payment of one hour at $8 (minimum wage). However, because she earned $16 over minimum wage ($2 above minimum wage x 8 hours = $16) for the eight hours of work, this amount can be used to offset the amount owed for the split shift pay. Therefore there is nothing owed to the employee in this example.  

A court clarified some aspects of split shift pay last year in the case Securitas Security Services USA, Inc. v. Superior Court. In that case, the plaintiffs were security guards that worked the graveyard shift. Securitas designated its workday as beginning at midnight and ending the following midnight. This resulted in the guards working shifts that started on one day, and then ended on the next working day. Plaintiffs argued that they were entitled to split shift pay because their shift ended in the morning, and then they were required to start a new shift several hours later in that same day. The Court ruled against the Plaintiffs and held that employees are not entitled to split shift pay when they work uninterrupted overnight shifts. In this case, there was no “split” in the shift. The court explained:

A "split shift" occurs only when an employee's designated working hours are interrupted by one or more unpaid, nonworking periods established by the employer that are not bona fide rest or meal periods. The fact that a single continuous shift happens to begin during one "workday" and end in another does not result in a "split shift."

However, the case left open the question of how long between shifts would constitute a split shift. For example, can an employee take a two hour lunch period without obligating the employer to pay the split shift pay? Until courts clarify this issue, conservative employers limit the meal periods to one hour.

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Three Legal Steps Employers Can Take To Ensure Employees Comply With Company Policy

The scenario is common: employers have policies in place to protect the employees and the company, but getting employees to comply with the policies is difficult. For example, a company has a policy that employees have to be on-the-clock for during all of the time they are working, but there is one or two employees who habitually forget to clock-out at the end of the day. In addition to the administrative hassles this creates, there are legal issues of how much time the employer should pay the employee for.

Generally, employers are required to pay for all time that the company knows or should have known the employee was working. But legally what can employers do to ensure that employees are complying with company policy?

Starting with what employers cannot do: withhold wages from the employee. The employer cannot use withholding or deductions from wages as a disciplinary measure. This is well settled under California law.

Three Steps Employers Should Take To Have Employees Comply With Policies

1. Have well written policies.

It goes without saying, the policies need to be legal and clearly written so that employees and managers can easily understand the policies.

2. Train managers so that they understand the policies and know how what to enforce.

Managers who do not understand what they should be requiring of employees, or worse, misinterpret a company policy when enforcing it, can create a lot of legal liability for the company. Routine training for managers on common issues that arise in the workplace can do a lot to prevent litigation.

3. Discipline employees for failure to comply with the policies.

While employers cannot withhold wages as a form of discipline, employers may still write up employees who violate company policies. For example, if an employee is either intentionally or otherwise not properly recording their time, they should be counseled and written up for the violations. They also need to be warned that if the problem continues, they could be terminated. There is another benefit to having this documentation. If the company is sued in a wage and hour class action for off-the-clock work, the plaintiffs need to prove that there is a company-wide policy that permits or encourages off-the-clock work. If the company has the records of disciplining employees who were abusing the time clock system, it will be strong evidence that the company actively prohibited off-the-clock work from occurring.

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Can Employers Ask For Applicants' W-2 or Tax Returns?

First it was Facebook passwords, now it is financials. It is becoming more regular that employers ask job applicants for a W-2 or tax returns in order to verify past salary or employment information. Kathleen Pender of the San Francisco Chronicle wrote a story on this interesting issue. Given the tough job market, many job seekers are feeling obligated to provide such information. While many people have the gut reaction that this type of request is improper, as the article notes, there is arguably nothing legally that limits employers from asking for this information.

Of course, the improper use of this information could result in liability for the employer who obtains the information. And, as noted in the article, employers who ask for this information only from individuals in protected classes (such as for race, gender, etc…) would be violating discrimination laws.

It is also interesting to note that the newly adopted Labor Code provision that only allows employers to conduct credit checks (referred to as a consumer credit report in the law) for certain types of employees, provides an exclusion that allows employers to ask for information that verifies income or employment. The law, Labor Code section 1024.5 took effect at the beginning of this year, and defines a consumer credit report as follows:

(1) "Consumer credit report" has the same meaning as defined in subdivision (c) of Section 1785.3 of the Civil Code, but does not include a report that (A) verifies income or employment, and (B) does not include credit-related information, such as credit history, credit score, or credit record.

Because a consumer credit report is defined as excluding verification of “income or employment,” employers asking for W-2s or tax returns would not trigger this provision of the Labor Code. However, as the article notes, it appears that employers are incorporating requests to verify applicant’s pass salary as part of a general background check process. Depending on the facts on the type of information obtained in the background check, it could be argued that the overall background check conducted in these circumstances may constitute one that is covered by Labor Code section 1024.5. If that is the case, the employer has additional objections under the law, and may actually be restricted from performing the background check in the first place.

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Meal and Rest Break Compliance After Brinker v. Superior Court

Have you attended webinars and read new legal updates on the new Brinker decision and still uncertain on how this applies to your company? Realizing that employers need to take a more active step in ensuring they are in compliance with the new decision, I've developed a package that actually assists employers in drafting and implementing a meal and rest break policy tailored to their business:

  • A draft of meal and rest break policy to comply with the standards set forth in Brinker.
  • Video presentation covering overview of Brinker (1 hour) and presentation materials.
  • 1/2 hour consultation for implementing meal and rest break policy tailored to your company.

The California Supreme Court made it clear in its decision that different industries and facts will either prohibit or permit employers from requiring different standards regarding the timing and offering of meal and rest breaks under California law.  General advice from webinars and articles are not sufficient to ensure companies are in compliance with the clarifications set forth in the decision.    The cost of the package is a flat fee of $450. 

More information about the compliance package is listed here

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NLRB's Attempt To Require Workplace Poster Is Temporarily Stopped

Here in California the Brinker decision has taken up most of my time over the last week.  Now I am finally able to focus on a national issue - as the Court of Appeals for the District of Columbia blocked the NLRB from requiring employers to post a notice of employee rights. The court’s decision comes after the federal court in South Carolina ruled that the NLRB exceeded its authority by requiring employers to post notices in the workplace.

The DC appellate court held:

The uncertainty about enforcement counsels further in favor of temporarily preserving the status quo while this court resolves all of the issues on the merits.

On April 17, the NLRB issued a statement setting forth its position:

The agency disagrees with and will appeal last week’s decision by the South Carolina District Court, which found the NLRB lacked authority to promulgate the rule.
Chairman Mark Gaston Pearce said of the recent decisions, “We continue to believe that requiring employers to post this notice is well within the Board’s authority, and that it provides a genuine service to employees who may not otherwise know their rights under our law.”

The NLRB’s website, which explains the notice, also sets forth:

The DC Circuit Court of Appeals has temporarily enjoined the NLRB’s rule requiring the posting of employee rights under the National Labor Relations Act. The rule, which had been scheduled to take effect on April 30, 2012, will not take effect until the legal issues are resolved. There is no new deadline for the posting requirement at this time.

From the docket, it appears that the matter is set for oral argument in September of 2012. So it is unlikely that the NLRB will attempt implement the poster in workplaces prior to this date. My previous post on the topic is here

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When Do Employers Have To Offer Meal And Rest Breaks? Analysis Of Brinker Corp. v. Superior Court

 

It has been a week now since the California Supreme Court issued its decision in Brinker Restaurant Corp. v. Superior Court. I’ve been getting a lot of questions, and have spoken on the topic a few times, and thought a couple of charts illustrating the Court’s holding would assist in understanding the decision. For a more general discussion of the Brinker decision, please see my previous article. 

 

Meal Periods

The California Supreme Court made clear in Brinker that employers need to give an employee their first meal break “no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work.” The Court said that contrary to Plaintiff’s argument, there are no additional timing requirements for the meal breaks. 

I’ve created this chart to help illustrate this point:

If an employee begins work at 8:00 a.m., the employee must start his break by 12:59, which is before the end of the 5th hour of work. 

Another issue in the case was Brinker’s policy of “early lunching.” Early lunching is when employers allow the employees to take their meal break within the first hour or two of arriving for work. Once the employee is given this first meal period, then they would continue to work for six, seven, eight, or more hours without an additional meal break. The Court rejected Plaintiff’s argument that this policy violated the law. The Plaintiff argued that the law required employers had a duty to provide meal breaks on a “rolling five” hour basis, or every five hours. 

Here is a chart that provides an example of an early lunching practice:

Before employers begin to employ an early lunching policy, they should do so with caution and some guidance. As Court cautioned employers that: “in the context of an eight-hour shift, ‘[a]s

a general matter,’ one rest break should fall on either side of the meal break. Shorter or longer shifts and other factors that render such scheduling impracticable may alter this general rule.”

Rest Breaks

As for of rest breaks, the Court set forth that, “[e]mployees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.” The Court’s holding can be summarized as follows:

In regards to when during the shift rest breaks should be taken, the Court held that “the only constraint of timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable.’” The Court stopped short of explaining what qualifies as “insofar as practicable”, and employers should closely analyze whether they may deviate from this general principle. 

 

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Brinker: California Supreme Court Clarifies Meal And Rest Break Requirements

Brinker Restaurant Corp. v. Superior Court (Hohnbaum) was finally decided by the California Supreme Court. The decision was anxiously awaited by many due to its clarifications of California employment laws regarding the duties employers have regarding offering meal and rest breaks, and when the breaks need to be taken.  The primary holding of the case is that employers do not need to ensure that no work is performed during meal breaks.  The Court, however, cautioned employers that they cannot undermine formal policies by pressuring employees to work during breaks.  Also of interest, as explained below, the Court provided a clarification of the rate that employees accrue rest breaks, which varies from how most employers interpreted the rest break requirement. 

Meal Periods
Employers Have No Duty To Ensure Meal Breaks Are Taken

The Plaintiff in the case argued that Brinker had to “ensure that work stops for a the required thirty minute[]” meal period. Alternatively, Brinker argued that under California law employers only had to provide meal periods and would not incur any liability if the employee did not take the break. The Court explained:

[Plaintiff] Hohnbaum contends an employer is obligated to “ensure that work stops for the required thirty minutes.” Brinker, in a position adopted by the Court of Appeal, contends an employer is obligated only to “make available” meal periods, with no responsibility for whether they are taken. We conclude that under Wage Order No. 5 and Labor Code section 512, subdivision (a), an employer must relieve the employee of all duty for the designated period, but need not ensure that the employee does no work.

The Court clarified that employers do not need to ensure that employees do not perform any work during their break:

The difficulty with the view that an employer must ensure no work is done—i.e., prohibit work—is that it lacks any textual basis in the wage order or statute. While at one time the IWC’s wage orders contained language clearly imposing on employers a duty to prevent their employees from working during meal periods, we have found no order in the last half-century continuing that obligation. Indeed, the obligation to ensure employees do no work may in some instances be inconsistent with the fundamental employer obligations associated with a meal break: to relieve the employee of all duty and relinquish any employer control over the employee and how he or she spends the time.

The Court also provided further clarification as to what meal period obligations employers have:

[T]he wage order’s meal period requirement is satisfied if the employee (1) has at least 30 minutes uninterrupted, (2) is free to leave the premises, and (3) is relieved of all duty for the entire period.

Therefore, the Court held:

To summarize: An employer’s duty with respect to meal breaks under both section 512, subdivision (a) and Wage Order No. 5 is an obligation to provide a meal period to its employees. The employer satisfies this obligation if it relieves its employees of all duty, relinquishes control over their activities and permits them a reasonable opportunity to take an uninterrupted 30-minute break, and does not impede or discourage them from doing so. What will suffice may vary from industry to industry, and we cannot in the context of this class certification proceeding delineate the full range of approaches that in each instance might be sufficient to satisfy the law.
On the other hand, the employer is not obligated to police meal breaks and ensure no work thereafter is performed. Bona fide relief from duty and the relinquishing of control satisfies the employer’s obligations, and work by a relieved employee during a meal break does not thereby place the employer in violation of its obligations and create liability for premium pay under Wage Order No. 5, subdivision 11(B) and Labor Code section 226.7, subdivision (b).

However, the Court also provided a warning to employers that, “On the other hand, an employer may not undermine a formal policy of providing meal breaks by pressuring employees to perform their duties in ways that omit breaks.”

Meal Period Timing Requirements

The Court also clarified when meal periods must be provided. The Court rejected Plaintiff’s argument that Brinker’s policy of “early lunching” violated the Labor Code. Early lunching is which is when employers allow employees to take their meal break within the first hour or two of arriving to work, and then have the employees continue to work to the end of their shift without taking another meal period. The Plaintiff argued that the Labor Code requires that employees take a meal period every five consecutive hours of work. In rejecting the Plaintiff’s argument, the Court stated:

Hohnbaum contends section 512 should be read as requiring as well a second meal period no later than five hours after the end of a first meal period if a shift is to continue. The text does not permit such a reading.

The Court explained the timing requirements of meal periods as follows:

We conclude that, absent waiver, section 512 requires a first meal period no later than the end of an employee’s fifth hour of work, and a second meal period no later than the end of an employee’s 10th hour of work.

 

Rest Periods
Rate Rest Periods Accrue To Employees

The Court began its explanation of the rate at which rest breaks must be given to employees by examining Wage Order No. 5. The Court focused in on subdivision 12(A) of the wage order, which provides:

Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (3½) hours.

The Court explained that “major fraction thereof” as applied to the four hour period referenced in the Wage Order means “any amount of time in excess of two hours – i.e., any fraction greater than half.” Therefore, by applying this calculation under the wage order, the Court held:

Employees are entitled to 10 minutes’ rest for shifts from three and one-half to six hours in length, 20 minutes for shifts of more than six hours up to 10 hours, 30 minutes for shifts of more than 10 hours up to 14 hours, and so on.

Timing Of Rest Breaks

The Court disagreed with the Plaintiff’s argument that rest breaks had to occur before meal breaks under the law. The Court held that the only “constraint on timing is that rest breaks must fall in the middle of work periods ‘insofar as practicable.’” The Court explained:

Hohnbaum asserts employers have a legal duty to permit their employees a rest period before any meal period. Construing the plain language of the operative wage order, we find no such requirement and agree with the Court of Appeal, which likewise rejected this contention.

 

...

Either the rest period must fall before the meal period or it must fall after. Neither text nor logic dictates an order for these, nor does anything in the policies underlying the wage and hour laws compel the conclusion that a rest break at the two-hour mark and a meal break at the four-hour mark of such a shift is lawful, while the reverse, a meal break at the two-hour mark and a rest break at the four-hour mark, is per se illegal.

 

The entire decision can be read from the Supreme Court's website here (PDF) (WRD).  I will definitely have more thoughts on this decision in the near term, and will be reviewing it in further detail over the weekend in preparation for the webinar my partner, Dan Turner and I will be conducting next Wednesday addressing the full impact the Brinker decision will have on employers.

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Brinker v. Superior Court Decision To Be Published Tomorrow

The California Supreme Court announced today that the opinion in Brinker v. Superior Court (Hohnbaum) will be published tomorrow at 10:00 a.m. The opinion will address many issues surrounding meal and rest break requirements under the California Labor Code, such as whether employers need to ensure or simply provide meal breaks, and when breaks should be taken during a shift.

For more information on the decision we will be holding a webinar next Wednesday at 10:00 a.m. PST. Registration information is here.

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New NLRB Poster Required For Most Employers By The End of April

There has been a lot of debate and legal action about the NLRB’s new posting requirements. However, as it now appears, most employers (union and non-union) will be required to post a new NLRB poster by April 30, 2012.

For more information about the new poster, visit the NLRB’s website here. Of particular importance is to determine if your company is required to post the poster, and that information can be found here.  Employers can simply print the poster from the NLRB's website. 

There has been a lot of discussion about the legality of this new posting requirement, but I generally agree with Daniel Schwartz of the Connecticut Employment Law Blog that this poster is just another one to put on the wall. Daniel points out that employees are probably more likely to Google some question before they go to the lunch room wall full of notice requirements. Will it really change things much? Probably not given that employees can access all of this information, and more on their smart phone.

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Webinar - The Impact of Brinker: Understanding The Supreme Court's Decision On Meal & Rest Breaks

Be among the first in California to understand the complete impact the monumental decision in Brinker v. Superior Court will have on employers. The Court’s decision is expected on April 12, and Anthony Zaller and Daniel Turner will analyze and discuss the impact of the decision. The webinar will explain the decision and what it means for employers and wage and hour class actions, discussing among other items:

  • Can meal periods be offered to employees, or do they need to be ensured?
  • When during the shift can meal and rest periods be taken?
  • What does the Court’s ruling mean for the status of meal and rest break class actions and class certification issues?
  • What is the impact for cases currently being litigated?

The cost is $150 per connection. 

Date: Wednesday, April 18
Time: 10:00 a.m. PST

Click here to register.  Existing clients can email us here to have the fee waived. 

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Employees Need To Take Control Of Their Online Identities

The recent (and not too recent) flurry of attention that has been given to the issue regarding whether employers can ask applicants and employees for their Facebook passwords is a good review of what is appropriate conduct for employers, but it is also a good reminder to employees that what they do online is of critical importance to their employment. Asking employees for passwords to social media account may cross the line. But how about Googling an applicant’s or employee’s name to find out more about them? This is not even an issue – or should not be one – given that this information is open to the public. I’ve even argued in the past that it could be negligent for an employer not to do this basic background internet check.

The Internet affords employers the ability to see beyond a resume to make better informed hiring decisions. If fact, Dorie Clark of the HBR Blog Network makes the point that everyone’s online presence is critically important to their professional careers. Dorie notes:

Sure, they probably have a Facebook account, and they may even be on Twitter. But they don't recognize that these are no longer personal communication tools, or a means of strengthening weak ties across their networks. Instead, they are the criteria by which you will be evaluated in the future. Just as Michael Deaver ensured that Ronald Reagan always stood in front of a perfect, picturesque backdrop — and set the standard for all subsequent leaders — you're now responsible for curating your image.

Dorie makes the observations that with the Internet: (1) your reputation always precedes you, (2) if you’re invisible online, you’re probably a fraud, (3) you progress or you stagnate (i.e., you create a valuable source of content through your twitter feed, blogging, etc…).

My interview with Guy Kawasaki last year discussed many of the same points. Guy noted that if you don’t have a Facebook page, or any other online presence, it will raise some questions about you. Are you not technical enough to get onto social media platforms? Are you hiding something?

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Everyone Needs To Calm Down About Social Media And The Law

I would love to be able to tell my clients that the Internet and social media has created a very complex set of legal issues that requires them to hire me in order to help develop all new handbook policies, change the way they conduct background checks on applicants, and monitor their employees. However, unfortunately, this is not the case. Employers and employees need to calm down a bit. I cringe when I hear employment lawyers (and Facebook’s Chief Privacy Officer recent comments about employers asking to have employee’s Facebook passwords) advising people to refrain from using the Internet to do background checks on applicants because it may reveal that they are in a protected category, and then this could (possibly) be grounds for a discrimination case. Are these same lawyers advising their clients not to conduct interviews because during a face to face interview the employer will learn the same information? And just because the employer knows that an applicant or employee is in a protect class does not mean that discrimination occurred if it takes an adverse employment action against the applicant or employee. Sure, all employers are subject to frivolous legal actions. But, as I tell my clients, there are only two things my clients and I can control: (1) the advice I give them about how to act according to the law, and (2) whether my clients listen to my advice and act accordingly. The one thing we cannot control, no matter how hard we wish we could, is being able to stop people from filing a baseless lawsuit.

We’ve had the Internet since the 1970’s, and it became mainstream in the 1990’s. I would argue that most people (at least in the U.S.) have had experience on the Internet for at least a decade now. There has not been a lot of case law that has changed the way employment lawyers advise their clients on new human resources policies given the advent of the Internet and social media.

Have the courts simply not caught up with these "new" developments?

As typical lawyers always suggests at this point - courts are slow to deal with emerging technology issues, but I don’t think that is a play here. Courts are slow, but we’ve been actively using the Internet for a decade now. They are not that slow, and I think rather that the rules that were already in place and governed employer’s and employee’s activities were and still are sufficient in addressing the vast majority of the employment issues involving the Internet and social media. Sure, on the fringes there are a few technical items that may be the exception to this, but for the vast majority of employers the Internet and social media does not change much about how HR should conduct itself. The basic analysis regarding monitoring and employee’s off work conduct and right to privacy – the issues usually at play in these types of cases – is the same if the conduct at issue was done off the Internet. I would even argue that privacy cases usually are easier when it involves a posting on the Internet, as no one has any reasonable expectation of privacy in such a public disclosure.

What about social media policies?

That usually leads to the next question, “What about social media policies?” Again, most employers probably don’t need a specific social media policy.  And a basic policy (if you really think a social media policy is necessary) that the employer may terminate or discipline an employee for anything they do on the Internet if the employer could terminate or discipline the employee if the conduct at issue did not occur on the Internet would normally be sufficient.

Employers, lawyers, and employees need to take a step back and realize that even though we have these great new technological advances, the law developed before this technology does a pretty good job at resolving these issues in the employment context.

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Statistical Analysis of Labor Commissioner Rulings Shows Inconsistencies

When faced with a hearing before the California Labor Commissioner in a Berman hearing, employers and employees alike expect to get a fair, consistent hearing to settle wage disputes. However, as Brian Sumers of the Daily Journal points out this is not always the case. His article (subscription required) provides an analysis of the inconsistencies that arise in holdings of cases heard by the Labor Commissioner’s office. It found that on average the deputy labor commissioners favor employees in about 80% of the cases they hear. In addition, the article analyzes how often specific deputy labor commissioners rule for employers or employees, and notes that the outcome varies drastically on the office and the deputy labor commissioner hearing the case. I’m quoted in the article as saying my experience has been consistent with this statistical analysis. The Labor Commissioner’s office states that it is focusing on additional training for the deputy labor commissioners to ensure a consistent enforcement of the wage laws.

Employers facing labor commissioner hearings need to ensure they are well prepared for the Berman hearings. Even though the same rules of evidence do not apply in Berman hearings as in civil court, the hearings are recorded and the parties testify under oath. Therefore, even if the deputy labor commissioner’s findings are against the employer, it is important to develop a record at this stage of litigation in order to establish the positions on appeal before a judge in superior court. For more information about hearings before the Labor Commissioner and how to prepare for them, see my previous posts here and here.
 

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Employers Requiring Employees To Provide Facebook Passwords

There are more reports of employers requiring applicants and employees to provide their passwords to their Facebook pages so that the employers can get a more accurate view of the employee’s character. I wrote about this issue a couple of years ago regarding the City of Bozeman requiring passwords from applicants. Apart from being a bad recruiting move, I believe it could arguably run afoul of California law as well.

Legality aside, employers that require this information will simply not get qualified applicants. I expect that most applicants or employees would simply refuse to provide this information. In addition, only people that don’t use social media much would have no problems with turning over their passwords. But companies need employees who understand social media these days, not someone who lacks initiative and some basic curiosity to at least log on to Facebook to see what the rest of the world is talking about.

In addition, there may be some real challenges against employers in California who require this information. First off, in California, Article I, Section I of the California Constitution guarantees citizens a right of privacy:

All people are by nature free and independent and have inalienable rights. Among these are enjoying and defending life and liberty, acquiring, possessing, and protecting property, and pursuing and obtaining safety, happiness, and privacy.

This right to privacy carries over to the workplace, but is even more protected when the employee is conducting personal activities during non-working hours. A person’s privacy expectation in their Facebook posts is very low since it is on the Internet. But one could argue that off-work conduct (which includes Facebook activity) is part of the employee’s privacy right recognized in the California Constitution.

Furthermore, section 96(k) of the Labor Code provides that the California Labor Commissioner may assert on behalf of employees:

Claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises.

For example, in Barbee v. Household Automotive Finance Corp. (2003), a court provided some guidance about the ramifications of section 96(k). Barbee was dating a subordinate at work, which violated the company’s policy and created a conflict of interest. The company gave Barbee and the employee with whom he was involved the option that one of them had to resign or to end the relationship. Barbee refused to resign, and they did not end the relationship, so the company terminated Barbee. Barbee sued, arguing that the company violated Labor Code section 96(k) in that his employer was regulating his lawful conduct during personal time. The court rejected Barbee’s argument in stating:

We conclude that Labor Code section 96, subdivision (k) does not set forth an independent public policy that provides employees with any substantive rights, but, rather, merely establishes a procedure by which the Labor Commissioner may assert, on behalf of employees, recognized constitutional rights. Therefore, in order to prevail on his wrongful termination claim, Barbee must establish that his employment was terminated because he asserted civil rights guaranteed by
article I of the California Constitution. We conclude that Barbee cannot make this showing and therefore he cannot establish the first necessary element of his wrongful termination claim.

While the court held that the company’s actions in that case did not violate section 96(k), the facts were very favorable to the employer, and there are other arguments available to employees. For example, an employee may also argue violation of Labor Code Section 98.6 which states in part that “no person shall discharge any employee ... because the employee … engaged in any conduct delineated in this chapter, including the conduct described in subdivision (k) of Section 96 ….”
Unfortunately, there are not many reported cases dealing with these issues. However, with the ubiquity of Facebook and other social medial sites, legislatures and courts will undoubtedly need to weight into these issues.

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The Enforceability of Class Action Waivers In The Employment Context

The National Labor Relations Board (NLRB) recently held in D.R. Horton, 357 NLRB No. 184, that a class action waiver in an arbitration agreement was unenforceable as it violates employees’ rights under the National Labor Relations Act (NLRA). Specifically, it held that employees have “the right ‘to engage in…concerted activities for the purpose of collective bargaining or other mutual aid or protection…” under section 7 of the NLRA and therefore any waiver to participate in class actions violates this right.

However, since the D.R. Horton decision courts have upheld class action waivers in the employment context and have rejected the NLRB’s reasoning in D.R. Horton as inconsistent with the United States Supreme Court’s holding in AT&T Mobility v. Concepcion, which permitted class action waivers in arbitration agreements. For example, in LaVoice v. UBS Financial Services, Inc. (S.D.N.Y.), the plaintiff brought a putative class action alleging various wage and hour violations of the Fair Labor Standards Act and New York labor laws. In rejecting the reasoning of D.R. Horton, the court held that:

Given that the Supreme Court held in AT&T Mobility that ‘[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA,’ this Court must read AT&T Mobility as standing against any argument that an absolute right to collective action is consistent with the FAA’s ‘overarching purpose’ of ‘ensur[ing] the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings. To the extent that [plaintiff] relies…on the recent decision of the National Labor Relations Board (‘NLRB’) in D.R. Horton, Inc. and Michael Cuda, Case 12-CA-25764, January 2, 2012, as authority to support a conflicting reading of AT&T Mobility, this Court declines to follow [that] decision[].

As I’ve written about previously, this area of the law is quickly changing. There is no doubt that new decisions this year will continue to add to the development of this area of the law.

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Things You Wanted To Know About Arbitration Agreements In California, But Were Afraid To Ask

 

What is an arbitration agreement?

            Employers can agree that they and any employees who enter into an arbitration agreement will resolve their differences before a private arbitrator instead of civil court. There are many different arbitration companies to choose from, but the American Arbitration Association and JAMS are two of the larger ones that are routinely appointed in arbitration agreements. 

Are they enforceable in California?

            Generally speaking, if the agreement is drafted and implemented properly, they are. However, arbitration agreements are routinely struck down by courts if they are not properly drafted. For example, recently a California court held in Ajamian v. CantorCO2e, that an arbitration agreement was not enforceable because it required the employee to waive statutory damages and remedies and only allowed the employer to recover its attorney’s fees if successful, not the employee. 

Why would an employer want to implement arbitration agreements?

            There are a number of reasons. The arbitration process can proceed more quickly than civil litigation, saving a lot of time and attorney’s fees in the process.  For example, often times the discovery process moves more quickly, and if there are any disputes, the parties can raise them with the arbitrator telephonically, instead of the lengthy motion process required to resolve disputes in civil court. The arbitration process is also confidential, so if there are private issues that must be litigated, these issues are not filed in the public records of the courts. The parties also have a say in deciding which arbitrator to use in deciding the case, whereas in civil court the parties are simply assigned a judge without any input into the decision. This is very helpful in employment cases, which often times involve more complex issues, and it is beneficial to the parties to select an arbitrator that has experience in resolving employment cases.   

Are class action waivers enforceable in arbitration agreements?

            Yes. Two recent U.S. Supreme Court cases, AT&T Mobility v. Concepcion and Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp. have established that class action waivers in arbitration agreements are enforceable. However, Plaintiffs continually challenge class action waivers on numerous grounds, and it is critical employers’ agreements are properly drafted and up-to-date. 

Should every employer implement arbitration agreements?

            No. The decision to implement an arbitration agreement should be reviewed with an employment lawyer to discuss the positives as well as the negatives of arbitration agreements. As discussed above, there are a lot of benefits of having an arbitration agreement in place, but it does not come without a few drawbacks. The primary drawback is that in California, the employer must pay all of the arbitrator’s fees in employment cases. Arbitration fees can easily be tens of thousands of dollars – a cost that employers do not need to pay in civil cases. However, if the company values the confidentiality and speed of process provided in arbitration, this extra cost may well be worth it.

 

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Stephen Colbert Provides Reminder That Family Medical Leave Is Not A Laughing Matter

It may come as a surprise, but Stephen Colbert is human, and like the rest of us, has a mother. He has taken a leave of absence from his show to apparently spend time with his ailing mother. An article I read recently notes how Colbert’s leave could trigger family medical leave. I thought the article does fine explaining family and medical leave, but given Colbert’s importance to The Colbert Report, it is also a good reminder about a narrow exemption to an employee’s reinstatement rights if they are a “key employee.”

Basic Medical Leave Rights
The Family Medical Leave Act (FMLA), and the California Family Rights Act (CFRA) both provide employees the opportunity to take up to 12 weeks of unpaid leave for certain “qualified” events. Employers with 50 or more employees (part-time employees are counted to make this determination) are covered by the FMLA and CFRA. Employees who have worked for at least 12 months and at least 1,250 hours in the immediately preceding 12 months are covered by the laws. However, employers do not need to provide the leave if the employee works at a location with fewer than 50 employees within a 75-mile radius.

“Key Employee” Exception
If the employee is covered by the FMLA or CFRA the employee is entitled to return to his or her former position, or a position that is equivalent to the previous position held with equivalent benefits, pay, and conditions of employment. The small exception to this is for “key employees.” A key employee is defined as a salaried employee who is the highest paid 10% of employees within a 75-mile radius. If the key employee’s reinstatement would cause “substantial and grievous economic injury” to the employer, then the key employee may be denied reinstatement. However, when the employee takes the leave of absence, the employer must provide notice to the employee that he or she is a “key employee” and explain their reinstatement rights. If the employer fails to do so at the time the employee goes on the leave of absence, it loses the ability to deny reinstatement to the employee under the “key employee” exception.

No need to worry about Colbert though. It is being reported that Colbert will be returning to our televisions tonight.

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New Law Effective 2012 Restricts Employers Ability To Conduct Employee Credit Checks

California’s new labor code provision severely restricts an employer’s ability to conduct credit checks on employees. Labor Code 1024.5, which took effect on January 1, 2012, only allows employers to conduct credit checks for employees who meet one of the following categories:

    • A managerial position.

    • A position in the state Department of Justice.

    • That of a sworn peace officer or other law enforcement position.

    • A position for which the information contained in the report is required by law to be disclosed or obtained.

    • A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: (A) Bank or credit card account information. (B) Social security number. (C) Date of birth.

    • A position in which the person is, or would be, any of the following: (A) A named signatory on the bank or credit card account of the employer. (B) Authorized to transfer money on behalf of the employer. (C) Authorized to enter into financial contracts on behalf of the employer.

    • A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.

    • A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.

A “managerial position” is defined as an employee who qualifies for the executive exemption set forth in the Industrial Welfare Commission’s Wage Orders. The test of who qualifies as an exempt executive is very detailed, and it is determined by the amount of pay and actual duties the employee performs. So employers need to approach this prong with caution and obtain guidance to ensure the employee actually qualifies as an exempt executive.

The new law also added the requirement under California Civil Code section 1785.20.5 that employers must notify the employee in writing of the basis in Labor Code section 1024.5 as set forth above that applies to permit the employer to perform the credit check. The new law does not change the other obligations already in effect that employers had to comply with prior to conduct a credit check. These obligations include informing the employee in writing that a credit check would be performed, the source of the credit check, and that the employee may receive a free copy of the credit check. Finally, if an adverse employment action is taken by the employer based on the report, the employee must be notified of the name and address of the reporting agency making the report.

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2012 Wage and Reimbursement Rates For California Employers

 

2012 Requirement

Source

 

California Minimum Wage

 

 

$8.00 per hour (unchanged from previous years)

 

California’s Industrial Welfare Commission

 

San Francisco Minimum Wage

 

 

$10.24 per hour

 

City of San Francisco

Computer Professional Exempt Salary Rate

 

 

 

$38.89 or annual salary of not less than $81,026.25 for full-time employment, and paid not less than $6,752.19 per month

 

 

Division of Labor Statistics and Research

 

Hourly Physicians Exempt Hourly Rate

 

 

$70.86 per hour

 

Division of Labor Statistics and Research

 

IRS Mileage Rate

 

 

 

55.5 cents per mile for business miles driven

 

 

Internal Revenue Service

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Template To Comply With Wage Theft Protection Act of 2011 Notice Requirement To All Hires Beginning in 2012 Published By Labor Commissioner

Today the Division of Labor Standards Enforcement (“DLSE”) published a template that employers can use in order to comply with the new notice requirements set forth in Labor Code section 2810.5. A Word version can be downloaded here and a PDF version can be downloaded here.

All California employers are required to provide a notice to all employees hired beginning on January 1, 2012 that complies with the requirements of section 2810.5. The new law required the Labor Commissioner to publish a template for employers to use in order to comply with the new law. For more information regarding the notice, and the new law, see my previous post.

I’ve only had a chance to do a quick review of the template, but one area of new information that the DLSE is apparently requiring on the notice is whether the “employment agreement” is oral or written in the wage information section of the template. The new Labor Code section 2810.5 did not require this to be on the notice to the employee, but the law does provide that there may be “[o]ther information added by the Labor Commissioner as material and necessary.” I am wondering if the fact that all employers are required to provide this information on the form necessary means that the “employment agreement” is therefore always going to be written.

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Can Employees Agree To Waive Berman Hearings In Arbitration Agreements?

I’ve recently written a series of posts regarding the Berman hearing process available for employees to resolve wage disputes before the Labor Commissioner. See previous posts: Overview Of Berman Hearings Before The Labor Commissioner and How To Prepare For a Berman Hearing. But can an employer have an employee sign an arbitration agreement in which the employee agrees to waive any rights to a Berman hearing, and all claims against the employer must proceed directly to arbitration? A good question, to which there is not currently an answer. The issue is currently under review by the California Supreme Court in the case Sonic-Calabasas A, Inc. v. Moreno

This also leads to the issue of why might an employer want to have all claims proceed directly to arbitration, and skip-over the Berman hearing. As the California Supreme Court stated in its initial review of the Sonic-Calabasas case in early 2011, the Berman hearing provides the employee a number of benefits:

These provisions include the Labor Commissioner's representation in the superior court of employees unable to afford counsel, the requirement that the employer post an undertaking in the amount of the award, and a one-way attorney fee provision that requires an employer that is unsuccessful in the appeal to pay the employee's attorney fees.

It is an interesting background on how the Sonic-Calabasas case proceeded through the Courts. The California Supreme Court has already ruled on the Sonic-Calabasas case in the early part of 2011. At that time, the Court held that a waiver of the Berman hearing process in the arbitration agreement was unconscionable and contrary to public policy, and was not preempted by the Federal Arbitration Act (FAA). Therefore, the California Supreme Court ruled that this waiver of the Berman hearing process was not an enforceable provision of the arbitration agreement. However, shortly after this ruling, the United States Supreme Court issued a ruling in AT&T Mobility v. Concepcion, a separate case out of California in which the US Supreme Court held that the FAA preempted California law and found that a class action waiver provision in arbitration agreements can be enforceable. For more information on AT&T Mobility you can listen to my podcast on the case here. The employer in Sonic-Calabasas A v. Moreno filed an appeal with the US Supreme Court to review the California Supreme Court’s ruling invalidating the Berman hearing waiver in the arbitration agreement. The US Supreme Court granted review, but recently sent the case back to the California Supreme Court to review the case again and to apply the standards set forth in AT&T Mobility v. Concepcion. So, we are waiting for the California Supreme Court to review the issue once again to have a definitive answer to the question.

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All California Employers Have New Employee Notice Requirements Beginning January 1, 2012

The new law affecting every employer in California is the Wage Theft Protection Act of 2011. It takes effect on January 1, 2012 and adds additional notice and record keeping requirements that employers must comply with. The new law added Labor Code section 2810.5, which requires private employers to provide all new employees with a written notice that contains certain information.

The new law requires private employers to provide all newly-hired, non-overtime-exempt employees with a disclosure containing the following information:

(a) The job rate or rates of pay and whether it pays by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime.
(b) Any allowances claimed as part of the minimum wage, such as for uniforms, meals, and lodging.
(c) The employer's regular payday, subject to the Labor Code.
(d) The employer's name, including any “doing business as” names used.
(e) The address of the employer's main office or principal place of business, and its mailing address, if different.
(f) The employer's telephone number.
(g) The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
(h) Other information added by the Labor Commissioner as material and necessary.

The new law also requires employers to notify employees in writing of any changes to the information in the notice within seven calendar days of any changes, unless the changes are reflected on a timely wage statement that complies with Labor code Section 226. Employers also do not need to notify employees of any changes if the change is provided in another writing required by law within seven days of the changes.

The new law requires the Labor Commissioner to publish a template for employers to follow in order to comply with the law. The Labor Commissioner’s website states it is “anticipated” and the template will be published in mid-December. However, as of the publishing of this post, the Labor Commissioner has not yet published the template.

There is no prescribed requirement in the law about how long this notice should be retained, but as wage and hour violations contain a four year statute of limitations, these notices should be retained in the employee’s personnel file for four years. It is also important to note that the new law does not apply to exempt employees. However, if there is ever a challenge to the employee’s classification as exempt and they are found to be non-exempt, this provision could result in increased penalties. Therefore, it may be wise to complete this form for exempt employees just as a safety precaution.

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How To Prepare For a Berman Hearing

My last post provided an overview of the Berman hearing process when an employee begins a claim for unpaid wages with the Labor Commissioner. If the parties do not settle the claim at the settlement hearing, then the matter will be set for a Berman hearing pursuant to Labor Code 98(a). The Berman hearing was designed to provide both parties a quick and easy way to resolve wage disputes. I like to think of it as very similar to a small claims proceeding. However, unlike small claims court which can only hear cases were the amount in dispute is $7,500 or less, the Labor Commissioner can hear and rule upon wage claims of any size. 

The formality of the Berman hearing varies dramatically from the Deputy Labor Commissioner who presides over the hearing. Some of the Deputy Labor Commissioners like the hearings to proceed in a very formal manner, much like a civil trial, while others are very hands off. Generally, each side will present their case, and will have the ability to cross-examine the other parties and witnesses. There are no set rules on how the hearings are supposed to be conducted, such as which party must present evidence first. I’ve even had a Deputy Labor Commissioner take a witness out of logical order of testifying in order to accommodate the witness’s schedule. The rules of evidence do not apply, so the process can take many different forms. Also, as I mentioned in my post describing an overview of the Berman hearing process, parties may have a lawyer represent them in front of the Labor Commissioner, but it is not required.

Unlike a civil trial, parties preparing for a Berman hearing generally are not allowed to conduct discovery to get a preview of the facts and witnesses the other side will present. So preparation for a Berman hearing may be a bit of guesswork, it is usually possible for the employer to get a good idea of the employee’s claims from the face of the complaint and the facts and issues that were discussed during the settlement conference. There are, however, a few items employers should do when preparing to defend a claim at a Berman hearing:

  • Prepare an opening statement setting forth what the evidence will show during the course of the hearing. Again, while some Deputy Labor Commissioners may simply start the proceeding without an opening statement, it is a good practice to have a short 5 minute summary of what your evidence will show.
  • Prepare an outline of the issues each witness will testify to. This helps streamline the testimony, and ensures that all of the items necessary areas are covered.
  • Prepare an outline for points to make during a cross-examination of the employee (as well as any potential witnesses).
  • Bring relevant witnesses to the hearing.
  • Bring the appropriate documents to use as exhibits.

Before the hearing beings, all of the witnesses are sworn in and the testimony given during the hearing is recorded by an audio recorder. This is why it is important to be prepared, know the law, and to know which admissions are important to obtain. If the employer appeals the Labor Commissioner’s ruling, both parties may obtain a copy of the audio recording of the Berman hearing. It is very critical to know the issues, and the use the Berman hearing as a way to get testimony in order to assist your case if there is an appeal of the Labor Commissioner’s ruling.

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Overview Of Berman Hearings Before The Labor Commissioner

I’ve had a lot of interest from clients lately about the details of the administrative hearing process that employees can pursue before the California Labor Commissioner. With this interest, and just having represented a client at a Berman hearing this week, I wanted to explain the process in a series of posts. 

An employee seeking recovery of unpaid wages has two options to pursue recovery: (1) file a civil lawsuit or (2) file a wage claim with the California Labor Commissioner under Labor Code section 98 et. seq. If the employee pursues her rights through the Labor Commissioner, the Commissioner will send notice to the employer regarding a settlement conference. This settlement conference is an informal conference during which a Deputy Labor Commissioner attempts to settle the case. Both parties may present their arguments, but the Deputy Labor Commissioner does not issue a ruling or decide any issues at this settlement conference.

If the settlement conference does not result in a settlement, the case will be set for an administrative hearing, known as a Berman hearing, pursuant to Labor Code section 98(a). During the Berman hearing, both parties can present their cases through testimony, witnesses, and documents. The hearings are basically mini-trials, but the formal rules of evidence do not apply. Moreover, parties do not need to be represented by a lawyer, but lawyers are regularly present to assist in presenting the evidence. The parties’ and witnesses’ testimony is under the penalty of perjury and the deputy labor commissioner records the hearing, and this audio recording can be obtained by the parties at a later date. The Deputy Labor Commissioner is supposed to issue an order, decision, or award setting forth the rational for his or her decision within 15 days of the Berman hearing. However, it has been my experience that the order, decision, or award is not usually issued in this time period given the drastic cuts in budgets and the huge workload facing the Labor Commissioner.

The Labor Commissioner’s award is binding on both parties, and is an enforceable judgment in Superior Court. The award, however, may be appealed to Superior Court by either party. 

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Employees Forfeit $34.3 Billion In Unused Vacation Time - Except In California

All too common is the assumption that because a company’s policies comply with Federal law, and perhaps other states’ laws, the policy should be fine under California law. This wrong assumption is clearly illustrated by a recent study by Expedia that estimates employees forfeit $34.3 billion in unused vacation time across the U.S. From what I’ve read, I do not see any adjustment in the study for the fact that such use-it-or-lose-it vacation policies are illegal under California law.

California law is clear that while paid vacations are not required, if a California employer provides for paid vacations, these benefits are considered wages and are earned by the employee on a pro rata basis for each day of work. Moreover, because vacation is a form of deferred wages and vests as it is earned, vacation wages cannot be forfeited – so no "use-it-or-lose-it" policies. An employer can place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours, and the Division of Labor Standards Enforcement has opined that a cap that allows at least nine months for the employee to use the vacation after the vacation was earned is a reasonable cap. See DSLE Enforcement Policies and Interpretations Manual section 15.1.4.1. Moreover, Labor Code section 227.3 requires that when an employment relationship ends all vacation earned but not yet taken by the employee must be paid at the time of termination.

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Use of Ships To Skirt California Laws?

The Wall Street Journal is reporting about the plans of Silicon Valley entrepreneurs who would like to anchor a ship 12 miles off the San Francisco coast in order to skirt U.S. Immigration laws. They project that the ships could hold 1,000 people at a cost for a room roughly equivalent (if not cheaper) to an apartment in San Francisco. The entrepreneurs view this as a viable option for tech start-ups to have access to skilled workers, who are having a difficult time obtaining H1-B visas to live and work in the U.S. Since it is simpler to obtain a B-1 visa that permits the worker to travel to the U.S. for meetings, seminars, and training, the ship would act as a staging area for the workers outside of the U.S., but still allow them to work in close proximity to the start-up company. The article mentions that the legal ramifications of immigration law may not permit this, but it made me wonder if the employer would effectively not have to comply with the California Labor Code as well. 

I believe it would be hard for the California Courts to establish that the Labor Code would apply to the workers stationed in a ship outside of the U.S. boarders for work completed outside of the state. Recently, the California Supreme Court held in Sullivan v. Oracle Corporation that California Corporations that employ non-resident workers in the state of California are subject to California’s Labor Code provisions, such as requirements for overtime pay which are vastly different than other states’ law and federal law (click here for a more detailed analysis of the Oracle decision). The Court in Oracle explained that states have broad authority under their police powers to regulate employment matters within their boundaries (such as child labor laws, minimum and other wage laws, and workers compensation laws). The Court stated, “To exclude nonresidents from the overtime laws’ protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states.”

However, that case was limited to work performed in California. The scenario proposed by the Silicon Valley entrepreneurs is vastly different, where non-citizens perform work outside of the U.S. and California boarders, and only travel into the State for meetings. It is analogous to the situation where employees living in China, but working for a California corporation, routinely travel to California for work.  Under Oracle, the argument could be made that the employees may have to be paid according to California law for the work done while in California, but it is unlikely this requirement would extend to the work done outside the state while on the ship.  These types of issues will be more and more common given how technology is changing the traditional concepts that workers have to be in a certain building, or even country, while performing work. 

 

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Webinar: New Laws Facing California Employers In 2012

 

Governor Brown signed a number of new employment laws that take effect in January 2012.  During this webinar, we will cover the new obligations facing employers under these recently enacted employment laws as well as the proper steps employers should take to comply with them.  The discussion will also cover the recent oral argument in Brinker Restaurant Corp. v. Superior Court and what steps employers should take while waiting for the Supreme Court’s ruling.

Other topics will include:

  • New laws effective January 2012, including:
    • Statute increasing the penalties for employers who misclassify independent contractors
    • What the Wage Theft Protection Act of 2011 means for employers
    • Gender identity and expression
    • Prohibiting e-verify requirements under the Employment Acceleration Act of 2011.
    • New requirement to provide health benefits during pregnancy disability leave
  • Review of new developments that took place in 2011:
    • Development of case law upholding class action waivers in arbitration agreements
    • Payment requirements for non-resident employees working in California

The cost is $150 per connection (no fee for existing clients).  Click here for more information and to register. 

 

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World's Best Policy To Minimize Employment Litigation

It is not often that the California Employment Law Report can opine outside of the boundaries of the state of California, but I am going out on a limb on this one. I came across what I would recommend to every employer as a way to reduce litigation. In the book, End Malaria, a new book published by the Domino Project, the chapter, Three Words From Ann Landers, written by Scott Stratten of UnMarketing, has the following recommendation:

Take these three words that Ann Landers recommended as a test and try them with your team for one day (I dare you):

Good.True.Helpful.

If what you’re about to say or email to someone doesn’t meet two out of those three criteria, reword it or don’t say it at all.

Instead of saying “Late again, eh?” you can say “Mike, you’re a valuable member of this team, and when you’re late it hold up everyone’s progress. What can I do to help you?

Scott says that people using his recommendation don’t even need to use all three criteria – just two. Companies spend so much time thinking about what type of messages they send their customers through marketing and sales campaigns, but do they spend even 10% of that effort into thinking about how to communicate with its own employees? Give it a try, and I bet the payoff will show up in higher employee retention, higher morale, and less lawsuits.

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Can Employers Require Employees To Take Polygraph Tests In California?

Simple answer: No. Employers cannot require that employees take a polygraph test, but if the employee voluntarily agrees to take the test, and the employer makes certain disclosures to the employee, then the employer may administer a polygraph.

California Labor Code section 432.2 is the governing labor code section. It states:

432.2. (a) No employer shall demand or require any applicant for employment or prospective employment or any employee to submit to or take a polygraph, lie detector or similar test or examination as a condition of employment or continued employment. The prohibition of this section does not apply to the federal government or any agency thereof or the state government or any agency or local subdivision thereof, including, but not limited to, counties, cities and
counties, cities, districts, authorities, and agencies. 

(b) No employer shall request any person to take such a test, or administer such a test, without first advising the person in writing at the time the test is to be administered of the rights guaranteed by this section.

Therefore, employers may administer polygraph tests if the employees voluntarily agree to the test and are informed of their rights under Labor Code section 432.2. Employers need to be careful, however, as federal law may also apply. It also raises a difficult issue for the employer: What if the employee refuses to take the test? Under section 432.2 the employer cannot use this refusal to take the test as grounds to terminate the employee. If there is a termination, the employee would likely argue that it violated his or her rights under this section, and this would leave the employer in a difficult position in explaining why the termination occurred.
 

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DOL Proposal May Require Employers To Provide More Wage Information To Employees

The DOL is pushing for regulations to require employers to provide more information about how employee’s paychecks are calculated. This week, the Labor Secretary Hilda Solis said that the Department of Labor is backing a proposal that would require employers to provide more information to employees in order help stop wage and hour violations. Bloomberg reported that the proposal “would require companies to give employees a report explaining how their pay and hours are set and is aimed at ensuring companies compensate workers for overtime.”

Many states already require certain information to be provided to the employees on their paystubs. For example, California Labor Code section 226(a) has specific requirements of the type of information that must be provided on employee wage statements. That section provides:

Every employer shall semimonthly, or at the time of each payment of wages, furnish each of his or her employees either as a detachable part of the check, draft, or voucher paying the employee's wages, or separately when wages are paid by personal check or cash, an itemized statement in writing showing: (1) gross wages earned; (2) total hours worked by each employee whose compensation is based on an hourly wage; (3) all deductions; provided, that all deductions made on written orders of the employee may be aggregated and shown as one item; (4) net wages earned; (5) the inclusive dates of the period for which the employee is paid; (6) the name of the employee and his or her social security number; and (7) the name and address of the legal entity which is the employer.

Many California employers, as well as out-of-state employers, often are unaware of this requirement, which can expose them to substantial penalties, even for minor, technical violations of this section.

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Is The Jury Still Out On Social Media Background Checks?

Mat Honan at Gizmodo wrote recently about a new company that helps employers search applicant’s “internet background” to assist in the hiring process. As Mat rightly points out, much of the concern over this “new technology” is overblown, and as he puts it, "[e]mployers would have to be stupid not to Google job candidates."  As I have pointed out before, much of the unduly concern is that lawyers don’t understand the technology, and therefore if they don’t understand it, their client’s use of the technology can only lead to bad things.

I think Guy Kawasaki had a great perspective on this issue when I recently interviewed him. He said he would be worried about a job applicant who did not have a Facebook page: what is wrong with this person? Is he anti-social? Is he not with the times or just simply does not understand simple technology? As Mat points out as well, with some common sense a job applicant can easily manage the results of an online search by being careful about which information he or she provides to the employer. For example, an internet search for the job applicant’s private email address might turn up more personal information than if the applicant has a separate email they only use for work purposes and lists on their c.v.

From the employer’s perspective I don’t think the analysis changes much for searching employees background on the Internet:

Generally, under Federal law, 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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California Employment Law Podcast - AT&T Mobility v. Concepcion Decision On Class Action Waivers And Arbitration Agreements

UFC's Social Networking Policy - Something All Employers Should Consider

I like the UFC’s approach to social media – reward its fighters with bonuses (totaling $240,000 per year) for having the most twitter followers and the most creative tweets. Is this a model a lot of employers could use in their workplace? Absolutely. Unless you find yourself with the few who are still wondering what Twitter is, it is obvious that social networking is here to stay and companies need to figure out a way to make it a productive part of their business. The model also gives the right message to employees – that they are responsible individuals who will use social media appropriately to help the company build its brand. This is a much better approach than telling employees about they cannot do with social media, which is what most companies’ policies do. By warning employees about all of the negative implications for them in using social media, it stifles potential branding opportunities that could exist for the company. And it is already stating the obvious.

If I were running a company, I would want my employees actively using their personal social media accounts to promote specials and new products. It is great that there are tools now available to track the success rate and to give incentives to employees who generate the most buzz. I can already hear other lawyers out there grumbling that this is a bad way to go, and that the company could find itself facing a lot of liability for what employees say on social networks. Every time an employee answers the phone they could create liability for a company, but companies still trust their employees to talk with vendors and customers. The game has changed, time to start communicating with customers where they are listening, and don’t let your policies hinder this.

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Can a California employee agree to accept a portion of their tips to count towards minimum wage?

A reader of the California Employment Law Report asks if it is possible to have employees enter into an agreement that would allow the employer to count a portion of the employees’ tips towards the minimum wage requirement. “Tip credit” is recognized by many states and it allows employers to count a portion of the employees’ tips towards a portion of the minimum wage requirement. Whether this is allowed and to what extent employers can offset their duty to pay minimum wage varies from state to state. Unfortunately, California does not allow tip credit. But the question raises another issue of whether it is possible to have employees agree to a tip credit even though the Labor Code does not provide for any credit.

As I’ve written about before, there are a few rights under the California Labor Code that employees cannot waive for public policy reasons. Labor Code Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws, and the statute voids any agreement between an employer and employee to work for less than minimum wage or not to receive overtime. It provides:

Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.

Therefore, any agreement entered into with employees permitting a tip credit would not be permitted under California law, as the employee would be waiving his or her right to minimum wage, which is not allowed under Labor Code Section 1194.

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Interview With Guy Kawasaki on Enchantment

I recently had the opportunity to interview Guy Kawasaki about his New York Times best selling book Enchantment.  I like to think of the interview as an extra chapter to Enchantment specifically for business owners and human resource managers about how to effectively manage employees.  We spoke about the following topics:

  • HR departments should be evangelists, not cops. 
  • HR needs to embrace social media.  A company should even be suspicious of an employee who does not have a Facebook page. 
  • How to recruit and retain great employees.  Hint: It is not about the money.

You can listen to the interview here, or through iTunes at the California Employment Law Podcast

My review of Enchantment can be read here

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Enchantment by Guy Kawasaki

Apple, Virgin America, 1965 Ford Mustang, and Mike Rowe. These are examples of Guy Kawasaki’s idea of Enchantment. In his new book he sets out to help readers understand what enchantment is in order to strive to be enchanting. Some have called it an update of How To Win Friends And Influence People for 2011.

Here are the ideas that caused me to dog ear the pages they were on and stood out for me:

  • To be likable, you need to find shared passions with others. To do this you need to do your homework, but it is easier today than ever to do so thanks to Google. Long gone are the days of reviewing back issues of newspapers to find out about people.
  • On launching a successful venture: “Perhaps [most presentations achieve] antienchantment, because people leave less intrigued than when they knew only rumors. Enchanting launches are more than press releases, data dumps, one-sided assertions, and boring sales pitches. They captivate people’s interest and imagination by telling a compelling story.”
  • Tell personal stories when conveying ideas. They do not need to be “epic” stories.
  • Marketing is turned upside down post-Internet - people depend on opinions of their friends and casual acquaintances more than “experts.”
  • Provide social proof. If everyone else sees other people doing it, then it must be ok.
  • Find something you agree with an opponent with before entering into negotiations. Small talk can often establish items in common, which will help lead to a successful resolution.
  • Embrace technology - especially social media.
  • Tell recruits for a company that you want them, and repeat often - even when they are employees.
  • Learn how to resist enchantment so that you are not enchanted by someone who does not have your best interest in mind.

It is also important to note about what is missing from the book: a chapter on price. As Guy puts it, “It is not about the money.” The book is a good reminder for business owners, human resource managers, and employees alike about what it takes to be successful today. Guy explains in more detail about what it takes to be a successful HR manager or have a successful HR department in my interview with him (or click here to listen on iTunes).

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When Must Employers Pay For On-Call or Standby Time?

The DLSE takes the view that, on-call or standby time at the work site is considered hours worked for which the employee must be compensated even if the employee does nothing but wait for something to happen. “[A]n employer, if he chooses, may hire a man to do nothing or to do nothing but wait for something to happen. Refraining from other activities often is a factor of instant readiness to serve, and idleness plays a part in all employment in a stand-by capacity”. (Armour & Co. v. Wantock (1944) 323 U.S. 126) Examples of compensable work time include, but are not limited to, meal periods and sleep periods during which times the employees are subject to the employer’s control. (See Bono Enterprises v. Labor Commissioner (1995) 32 Cal.App.4th 968 and Aguilar v. Association For Retarded Citizens (1991) 234 Cal.App.3d 21)

Whether on-call or standby time off the work site is considered compensable must be determined by looking at the restrictions placed on the employee. A variety of factors are considered in determining whether the employer-imposed restrictions turn the on-call time into compensable “hours worked.” These factors, set out in a federal case, Berry v. County of Sonoma (1994) 30 F.3d 1174, include whether there are excessive geographic restrictions on the employee’s movements; whether the frequency of calls is unduly restrictive; whether a fixed time limit for response is unduly restrictive; whether the on-call employee can easily trade his or her on-call responsibilities with another employee; and whether and to what extent the employee engages in personal activities during on-call periods.
 

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Reader Question - Workplace Relationships

Q:  Is it "Illegal" to work with a relative as your co-worker or supervisor, or is it left up to the facility/business to make rules regarding how/who they hire as their employees?

There is nothing in California law that prohibits family members from working together. However, many companies institute non-fraternization or anti-nepotism policies as a safety measure to prevent work-place disputes that boil over from non-work relationships as well as to avoid claims of sexual harassment or discrimination. In fact, it is advisable for companies to have such policies.

One of the most problematic areas that arises is when two employees are dating, but the relationship goes sour. As you can imagine, this creates an awkward working environment that will take away from the employees’ productivity, in addition to exposing the company to a sexual harassment claim if one of the employees continues to pursue the other while at work. Also, if the relationship was between a supervisor and a subordinate, the company faces liability if the supervisor favors the person he/she is having the relationship with over other employees when making decisions about bonuses or promotions.

To avoid this problem, many companies have policies in place the either prohibit relationships at work, or some companies require the employees to disclose the relationship. Then the company can work with the employees to see if moving one or both employees to different divisions and/or locations within the company could prevent any potential problems should the relationship not workout in the future. Employers have to walk a fine-line however, because employees have an expectation of privacy about their personal lives while away from work, so employers cannot have too evasive policies. It is best to have a knowledge CA employment lawyer review the policy in advance.
 

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Medical Marijuana Raising New Employment Law Issues

The Wall Street Journal reported yesterday about the difficulties employers are facing when employees are found to have marijuana in their systems while at work.  The article notes employees are asking if they could use their company-provided flex spending accounts to purchase the medical marijuana.  There are many issues that will have to be resolved in this newly developing area of the law.  However, in California, employers were given pretty clear guidance by the California Supreme Court in Ross v. Ragingwire Telecommunications, Inc. about employees' rights in the workplace when using medical marijuana. 

In Ross, the California Supreme Court held that it is not a violation of California law for an employer to terminate an employee who tests positive for marijuana, even though the employee was prescribed the marijuana for medical purposes under California’ Compassionate Use Act of 1996.

The conflict in Ross v. Ragingwire Telecommunications, Inc. was between California's Compassionate Use Act, (which gives a person who uses marijuana for medical purposes on a physician’s recommendation a defense to certain state criminal charges and permission to possess the drug) and Federal law (which prohibits the drug’s possession, even by medical users). The employer in this case terminated plaintiff’s employment based on a positive test for marijuana even through the plaintiff provided a doctor’s note explaining that he was prescribed marijuana to alleviate back pains. 

The Supreme Court explained that the employer's decision to terminate plaintiff was not illegal:

Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and duties of employers and employees. Under California law, an employer may require preemployment drug tests and take illegal drug use into consideration in making employment decisions. (Loder v. City of Glendale (1997) 14 Cal.4th 846, 882-883.)
Plaintiff’s position might have merit if the Compassionate Use Act gave marijuana the same status as any legal prescription drug. But the act’s effect is not so broad. No state law could completely legalize marijuana for medical purposes because the drug remains illegal under federal law (21 U.S.C. §§ 812, 844(a)), even for medical users (see Gonzales v. Raich, supra, 545 U.S. 1, 26-29; United States v. Oakland Cannabis Buyers’ Cooperative, supra, 532 U.S. 483, 491-495). Instead of attempting the impossible, as we shall explain, California’s voters merely exempted medical users and their primary caregivers from criminal liability under two specifically designated state statutes. Nothing in the text or history of the Compassionate Use Act suggests the voters intended the measure to address the respective rights and obligations of employers and employees.

The Court also provided that a reasonable accommodation, as required under California’s FEHA, does not include an employer’s permission to use illegal drugs:

 

The FEHA does not require employers to accommodate the use of illegal drugs. The point is perhaps too obvious to have generated appellate litigation, but we recognized it implicitly in Loder v. City of Glendale, supra, 14 Cal.4th 846 (Loder). Among the questions before us in Loder was whether an employer could require prospective employees to undergo testing for illegal drugs and alcohol, and whether the employer could have access to the test results, without violating California’s Confidentiality of Medical Information Act (Civ. Code, § 56 et seq.). We determined that an employer could lawfully do both. In reaching this conclusion, we relied on a regulation adopted under the authority of the FEHA (Cal. Code Regs., tit. 2, § 7294.0, subd. (d); see Gov. Code, § 12935, subd. (a)) that permits an employer to condition an offer of employment on the results of a medical examination. (Loder, at p. 865; see also id. at pp. 861-862.) We held that such an examination may include drug testing and, in so holding, necessarily recognized that employers may deny employment to persons who test positive for illegal drugs. The employer, we explained, was “seeking information that [was] relevant to its hiring decision and that it legitimately may ascertain.” (Id. at p. 883, fn. 15.) We determined the employer’s interest was legitimate “[i]n light of the well-documented problems that are associated with the abuse of drugs and alcohol by employees — increased absenteeism, diminished productivity, greater health costs, increased safety problems and potential liability to third parties, and more frequent turnover . . . .” (Id. at p. 882, fn. omitted.) We also noted that the plaintiff in that case had “cite[d] no authority indicating that an employer may not reject a job applicant if it lawfully discovers that the applicant currently is using illegal drugs or engaging in excessive consumption of alcohol.” (Id. at p. 883, fn. 15.) The employer’s legitimate concern about the use of illegal drugs also led us in Loder to reject the claim that preemployment drug testing violated job applicants’ state constitutional right to privacy. (Id. at pp. 887-898; see Cal. Const., art. I, § 1.)

(footnote omitted).

The Plaintiff also alleged a cause of action for wrongful termination in violation of public policy. Generally, at-will employees can terminate or be terminated from their job at any time, but an employer cannot terminate an employee for reasons that violate a fundamental public policy of the state. The Court rejected plaintiff’s position that there was a fundamental public policy that permitted him to use medical marijuana and be under its influence while at work explaining: “Nothing in the [Compassionate Use Act’s] text or history indicates the voters intended to articulate any policy concerning marijuana in the employment context, let alone a fundamental public policy requiring employers to accommodate marijuana use by employees."

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Waitress fired for Facebook post

This week the internet is buzzing about a waitress who was fired for making disparaging comments on Facebook about a customer.  It was inevitable, and if employers have not realized it yet, this story should bring the point home that social networking is yet another issue employers need to take a proactive step in managing.  This is also a wake up call for employment lawyers who have neglected to come up to speed on the new issues social networking present in the employment context. 

In California, a court has ruled that postings so social networking sites are not private (click here for post).  So while it would be difficult for an employee to have a claim for violation of privacy, employers should consider what they can and cannot do regarding information they learn about employees on the internet as well as conducting background checks on the internet. Some employers have even gone as far as asking prospective employees for their login information for social networking sites as part of the interview process

The lesson:

Social networking sites are here to stay.  It is time for employers to manage this issue by learning what they can legally do to protect the company's interest on the Internet.  Employees and individuals have to realize that the information posted on the Internet is usually discoverable by everyone - it is not only a conversation between friends. 

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Self-imposed MCLE for lawyers: computers, Internet and the law

Daniel Schwartz at the Connecticut Employment Law Blog writes about whether or not employment lawyers who advise their clients on social networking policies need to use social networking. I’ve writing on this topic before, but as the Internet becomes more and more dominate in everyday life, Daniel prompted me to revisit the issue. 

While I do not think lawyers need to be IT experts, we all should have a working knowledge of technology, the Internet, social networking sites, and new developing technologies. Technology and the law are becoming so intertwined that I imagine that this will be a component of the MCLE requirement for lawyers within the next 10 years.

Lawyers need to have a working knowledge of technology for a number of reasons. First, IT issues predominate many discovery issues in litigation – and there is a wealth of IT information available through discovery if the attorney has an understanding of what type of information is recorded and how to refer to that information to get it. Second, if a lawyer is advising clients on social networking policies, the lawyer needs to be familiar with the different web sites available and generally how they work. It would, needless to say, be embarrassing to not at least be familiar with some of the more common technical terms, so when advising a client the lawyer does not refer to a “website number”.

Finally, there is no excuse to at least create an account and look around Twitter, Facebook, or LinkedIn – its free and it could be a good excuse to have your son or daughter teach you something. Here is a great list of some of the most used social networking sites one could start with.
 

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Does the California Labor Code Apply to Summer Interns?

With the summer shortly upon us, employers will no doubt be faced with students looking for internship opportunities.  Employers need to be very careful in characterizing students as interns, and not paying them minimum wage and following California's other numerous Labor Code provisions that protect employees.  

In April 2010, the Department of Labor Standards Enforcement (DLSE) issued an opinion letter setting for the analysis it would conduct in making a determination regarding whether an intern is properly classified.  In its opinion letter, the DLSE set forth that it would examine the following factors:

  1. The training, even though it includes actual operation o the employer’s facilities, is similar to that which would be given in a vocational school;
  2. The training is for the benefit of the trainees or students;
  3. The trainees or students do not displace regular employees, but work under their close observations;
  4. The employer derives no immediate advantage from the activities of trainees or students, and on occasion the employer’s operations may be actually impeded;
  5. The trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
  6. The employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

While these factors are a fairly loose test, an intern attempting to challenge the classification as an intern would probably have at least a few good facts to support their position. This is why California employers need to approach the intern classification with caution.

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Easier To Catch Liars

We are nearly at the point were everything we do is recorded.  Think no one knows where you are?  Wrong, your phone's GPS can be used to track your location without you knowing about it. 

Parties to lawsuits have not realized this new phenomenon either.  In almost every case I have litigated in over the last two years the parties' emails have played a critical role.  Why is that?  First, almost all communications are done through email.  Email drafted three years ago, and produced in the course of litigation has a lot of credibility because it recorded the facts as they existed at the time the writer sent the email.  It is is very hard to dispute those facts. 

Is This Good Or Bad?

It is good because it is that much easier to catch a lair these days.  It is also bad, because if you do not take the time to accurately draft an email - and your words could have two meanings - it could come back to bite you.  Seth Godin had some good advice today, and provided 8 tips that are well worth a review:

1. Change your settings so that email from you has a name, your name, not a blank or some unusual characters, in the from field. (ask a geek or IT person for help if you don't know how).
2. Change your settings so that the bottom of every email includes a signature (often called a sig) that includes your name and your organization.
3. Change your settings so that when you reply to a note, the note you're replying to is included below what you write (this is called quoting).
4. Don't hit reply all. Just don't. Okay, you can, but read this first.
5. You can't recall an email you didn't mean to send. Some software makes you think you can, but you can't. Not reliably.
6. Email lives forever, is easy to spread and can easily show up in discovery for a lawsuit.
7. Please don't ask me to save a tree by not printing your email. It doesn't work, it just annoys the trees.
8. Send yourself some email at a friend's computer. Read it. Are the fonts too big or too small? Does it look like a standard email? If it doesn't look like a standard, does this deviation help you or hurt you? Sometimes, fitting in makes sense, no?


It is also worth remembering how useful email can be as a tool to record facts as they exist on a certain day and time.  It is very easy to send yourself an email to record a discussion that took place - and this email will have a lot of credibility should that discussion ever be the center of lawsuit.

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"It didn't happen if you didn't write it down"

I came across an article recently by Design by Gravity (via Lifehacker) - Methods of Work: It Didn't Happen If You Didn't Write It Down - reminding designers and programmers to record their thoughts in some manner, or else lose it forever.  The lesson does not apply just to designers and programmers, but also to HR professionals or anyone else involved in managing employees. 

I have yet to complain about a client involved in an employment lawsuit that the client took too many notes.  The employment lawyer's mantra is document, document, document.  Why?  Just as the article suggests, if you have a conversation, but do not record the conversation in some manner, it never happened. 

The author suggests a lot different technologies that can help with recording events.  However, I prefer the pen and paper - but I force myself to PDF my notes as soon as possible so that I will never misplace them.  Just had a conversation while you are driving and have another 30 minutes of rush hour traffic to contend with?  In this case, I've been using Dragon, a free iPhone app, that transcribes your speech into text that you can either text or email to yourself.  This is a great way to create a time stamped document reflecting what was said.  

Photo by e walk

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What Labor Code requirements can employees waive?

It may come as a surprise to many employers that employees cannot waive, or enter into contracts contrary to many of California’s Labor Code requirements. The rationale for this is pretty basic: if employees could waive the rights given to them under the Labor Code, every employer would simply require the employee to waive the rights on the first day of work, rendering the Labor Code meaningless.

A general rule for Courts is found in Civil Code section 3513, which provides: “Any one may waive the advantage of a law intended solely for his benefit. But a law established for a public reason cannot be contravened by a private agreement.” California courts have found that many of the Labor Code provisions are for the public good, and therefore cannot be waived by an employee.  

Labor Code Provisions An Employee Cannot Waive:

  • Minimum Wage & Overtime

Labor Code Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws. That statute clearly voids any agreement between an employer and employee to work for less than minimum wage or not to receive overtime:

Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.

In Gentry v. Superior Court, the Supreme Court further explained:

[Labor Code] Section 510 provides that nonexempt employees will be paid one and one-half their wages for hours worked in excess of eight per day and 40 per week and twice their wages for work in excess of 12 hours a day or eight hours on the seventh day of work. Section 1194 provides a private right of action to enforce violations of minimum wage and overtime laws.

By its terms, the rights to the legal minimum wage and legal overtime compensation conferred by the statute are unwaivable. “Labor Code section 1194 confirms ‘a clear public policy . . . that is specifically directed at the enforcement of California’s minimum wage and overtime laws for the benefit of workers.’”

  • Expense Reimbursement

Labor Code section 2802 requires employers to reimburse its employees for “necessary expenditures or losses incurred by the employee” while performing his or her job duties. Labor Code section 2804, clearly provides that an employee cannot waive this right to be reimbursed for or liable for the cost of doing business. Section 2804 provides, “Any contract or agreement, express or implied, made by any employee to waive the benefits of this article or any part thereof, is null and void….”

Labor Code Provisions An Employee May Be Able To Waive:

While it is unclear, the following items could possibly be waived by an employee. However, these areas are very unsettled, and employers should approach with caution when seeking waivers from employees on these issues.

  • Meal Breaks

The California Supreme Court is currently reviewing the case Brinker v. Superior Court, that should address, among other issues, the standard regarding how employers need to provide meals breaks. At issue is whether employers need to simply “provide” employees with meal breaks, or on the other hand, “ensure” that employees take meal breaks. If the Supreme Court rules that employers only need to provide meal breaks, then if the employee chooses not to take the meal break, then arguably there would be no violation. The Supreme Court will hopefully issue a ruling on this case in 2010.

  • Waiver To Participate In A Class Action

Given the increase in wage and hour class actions, employers began seeking agreements from their employees that if a dispute would arise about any wage and hour issue, the employee would agree to only seek remedies on an individual basis, not through a class action. The California Supreme Court reviewed the issue if an employee could enter into such an agreement and found that, “at least in some cases, the prohibition of classwide relief would undermine the vindication of the employees’ unwaivable statutory rights and would pose a serious obstacle to the enforcement of the state’s overtime laws.” The Court therefore set out a number of factors that a trial court must look at to determine whether the class action waiver is enforceable or not. As of February 2010, there has not been a class action waiver that has been upheld by an appellate court in California. So while there is the possibility of enforcing such waivers, this possibility is very slight.
 

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Recruiters for temporary staffing company must be paid overtime

The case Pellegrino v. Robert Half International, Inc. (RHI) was brought by recruiters alleging that RHI failed to comply with Labor Code provisions pertaining to overtime compensation, commissions, meal periods, itemized wage statements, and unfair competition (under Business and Professions Code section 17200). 

As defenses, RHI argued that Plaintiffs’ claims were barred because they all entered into agreements that shortened their statute of limitations down from four years to six months. RHI also argued that the Plaintiffs were exempt from wage and hour laws because the employees qualified for the administrative exemption. The appellate court, in agreeing with the lower trial court, dismissed RHI’s defense that the Plaintiffs’ agreed to a shorter statute of limitation on the grounds that this agreement violated public policy and is unenforceable.

The Administrative Exemption

Employers bear the burden to prove that the employee does not qualify for overtime of one and a half times the employee’s regular hourly rate for all work performed over eight hours in one day and/or all hours over 40 in one week. Employees can qualify for a number of different exemptions, and in this case RHI argued that the Plaintiffs were administrative employees.

In order to qualify for the administrative exemption, the court noted that the employer must prove that the employee must:

(1) perform office or non manual work directly related to management policies or general business operations’ of the employer or its customers,

(2) customarily and regularly exercise discretion and independent judgment,

(3) perform under only general supervision work along specialized or technical lines requiring special training or execute under only general supervision special assignments and tasks,

(4) be engaged in the activities meeting the test for the exemption at least 50 percent of the time, and

(5) earn twice the state’s minimum wage.

The employee must meet all five elements in order to be an exempt administrative employee.

The court explained, by quoting the applicable regulations, that:

“The phrase ‘directly related to management policies or general business operations of his employer or his employer’s customers’ describes those types of activities relating to the administrative operations of a business as distinguished from ‘production’ or, in a retail or service establishment, ‘sales’ work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management or operation of the business of his employer or his employer’s customers.”

The court found that the evidence did not support RHI’s argument that the Plaintiffs were administrative employees. The court explained that the account executives were trained in sales and evaluated on how well they met sales production numbers – which are not exempt duties. The account executives were also primarily responsible for selling the services of RHI’s temporary employees to its clients. And when they were not selling, they were recruiting more candidates for RHI’s “inventory.” The account executives also followed a “recipe” established by the company which required the employees to rotate their duties ever week between a “sales week,” “desk week,” and recruiting week.” The employees did not develop any policy, but simply followed the company’s system of performing their job. The court finally noted that the Division of Labor Standards Enforcement (DLSE) previously opined that recruiters who worked in a recruiting company did not qualify for the administrative exemption (which can be read at the DLSE’s website here (PDF)). All of these facts supported the trial court’s finding that the employer failed to meet its burden that the account executives were administrative employees.

This case is a good reminder to employers that they must be careful about how employees are classified. Simply because the employee has a high-level title, or every employer in the particular industry has always treated this type of employee as an exempt employee does not mean that the employees are properly classified. Courts will strictly apply the applicable exemption element-by-element to determine whether or not the employer must pay the employee overtime and provide meal and rest breaks. Finally, employers must remember that they will bear the burden of proof when asserting in court that the employee is properly classified as an exempt employee.

The case, Pellegrino v. Robert Half International, Inc. can be downloaded here (PDF).

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You are a linchpin

Despite your teachers, friends, boss, colleagues and family members telling you otherwise, you are a linchpin. You are a genius that can succeed in the new economy. Seth Godin’s new book, Linchpin, sets out to challenge you to unlearn what school and society has rewarded in the past, and to let us all know that we are linchpins (if we make the choice to be). 

I just finished reading an advance copy of Linchpin, and have to recommend the book to anyone who either manages people at work or for anyone who has to work for a living. I have read many of Seth’s other books which provide prophetic insight how the Internet and technology have changed marketing and business forever. Linchpin similarly argues that technology is changing the business world dramatically, but the book focuses more on what these changes mean for individuals, and the new opportunities and rewards for those who chose to be linchpins.

What is a linchpin?

The term is defined by the Merriam Webster dictionary as: “(1) a locking pin inserted crosswise (as through the end of an axle or shaft); (2) one that serves to hold together parts or elements that exist or function as a unit <the linchpin in the defense's case>.” Seth’s theme throughout the book is that a linchpin is an artist who challenges the status quo, and in doing so creates value, and in doing this become indispensible. An artist is not necessarily someone who creates a painting, but Seth says a lawyer, engineer, salesman, politician or a mid-level manager in a large company can all create art. Seth argues that “art is the ability to change people with your work, to see thing as they are and then create stories, images, and interactions that change the marketplace.”

Is it hard to be a linchpin?

Definitely. As Seth observes, “Nothing about becoming indispensable is easy. If it’s easy, it’s already been done and it’s no longer valuable.” But as Seth argues, in today’s world to be “successful” you have no choice but to be a linchpin. Not being a linchpin relegates a worker’s work into a commodity, which makes the worker easily replaceable by the next person who will do the work cheaper.

The book covers the shift in economics that the Internet has developed, which has opened up so much more opportunity. In the past, the bourgeoisie controlled the capital to invest in factories. The proletariat workers had little leverage in the equation because they do not possess the capital to create their own factories. Today, however, “the proletariat own the means of production.”   With the new economy, we have to unlearn the factory mind-set that we have been programmed to live by over the last 100 years – which rewarded showing up for work and following the rules. The Internet has changed this.

While technology has changed the rules of the game, individuals need to make a choice. Society does not reward blind rule-following, but instead requires linchpins who do not have maps telling them what to do next. This is difficult, as we are conditioned by society to follow the status quo and to fit in. Linchpins understand this, and must continually fight off the tendency to give-up, conform and to take the easy path by simply following the rules (Seth refers to this tendency as the resistance).

What does this have to do with employment law?

Well, as a blogger, I have read Seth's blog for a couple of years.  Before I read the book, I thought it would have no relationship to employment law what-so-ever.  But, only a few pages into the book I realized that this book is a must read for managers and human resource professionals. Companies need to realize they now need linchpins within their organizations, and they need to allow employees room to be linchpins, instead of drowning out these productive individuals by forcing them to conform. Seth notes that “Great bosses and world-class organizations hire motivated people, set high expectations, and give their people room to become remarkable.”  This book is not only a wake-up call to managers about what type of employee is needed in today's workplace. 
 

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Arbitration Agreement Upheld Despite Employee's Argument It Was Not Mutual And Adhesive

In Roman v. Superior Court, the Court of Appeals upheld an arbitration agreement where the employee challenged the agreement by arguing that the agreement was unenforceable because it only obligated the employee to arbitrate his claims. The court disagreed with plaintiff’s argument and explained that the mere inclusion of the words “I understand” or “I agree” does not destroy the mutuality of an arbitration agreement. Roman v. Superior Court, 172 Cal.App.4th 1462, 1473 (2009).

The arbitration agreement at issue in the case provided:

I hereby agree to submit to binding arbitration all disputes and claims arising out of the submission of this application. I further agree, in the event that I am hired by the company, that all disputes that cannot be resolved by informal internal resolution which might arise out of my employment with the company, whether during or after that employment, will be submitted to binding arbitration. I agree that such arbitration shall be conducted under the rules of the American Arbitration Association. This application contains the entire agreement between the parties with regard to dispute resolution, and there are no other agreements as to dispute resolution, either oral or written.

Id. at 1467 (citation omitted). The agreement was contained in an employment application and clearly provided: “Please Read Carefully, Initial Each Paragraph and Sign Below.” Plaintiff also initialed next to the paragraph that contained the arbitration agreement. The court found that simply because the agreement in that case was an adhesion contract (or on a “take-it-or-leave-it” basis), it still did not render the agreement unenforceable because the agreement was fair. Even though the agreement contained the words “I agree”, this did not render the arbitration agreement to only bind the employee and not the employer to the arbitration agreement.

The Roman court also noted that even if the agreement “were somehow ambiguous on this point, given the public policy favoring arbitration [citation] and the requirement we interpret the provision in a manner that renders it legal rather than void [citation], we would necessarily construe the arbitration agreement as imposing a valid, mutual obligation to arbitrate.” Roman, supra, 172 Cal.App.4th at p. 1473.  Employers should consider the pros and cons of having employees enter into arbitration agreements, and as this case illustrates, courts are likely to enforce the agreement if it is properly drafted. 

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HR professionals note to employment lawyers: stop working off of fear

The HR blog Fistfull of Talent raises a concern I think a lot of HR professionals feel. See article “Hey Employment Law ‘Experts’, You’re Killing My Profession.” Kris Dunn expresses the all too common sentiment that employment lawyers are not advising their clients – but are rather scaring them into inaction. Kris uses the example of advice some lawyers are providing about whether or not companies should use social networking sites and Google to conduct background checks on job applicants. Taking the conservative approach, many lawyers, as Kris notes, advise against using these new technologies out of concern that it could create potential discrimination claims. (Side note to Kris – I warned awhile ago that companies should be using the Internet to conduct background checks.)

Kris’ analysis is right on for a number of reasons. First, lawyers are trained to point out the risks of any situation to properly advise their clients. Second, lawyers are notoriously behind the technology curve. Most do not know what “new” technologies are being used or how to use them, and this creates concern as anyone is scared about what they do not know about.

Employment lawyers need to take heed of this critique. HR professionals have jobs to perform and companies to run. They need legal advice that helps them perform their jobs better – not scare them into failing to change and keeping up with the times.

Employment lawyers need to recognize that change entails risk. However, companies always have to change, and lawyers need to help companies navigate this risk, not prevent them from doing anything new.

Note to HR professionals

As you know, the HR profession is changing a lot given today’s new technologies. New issues are creating a lot of uncertainty. Issues such as how to use social networking sites to conduct background checks, monitoring employee’s internet use, and determining "hours worked" when employees always have a smart device on them.

When looking for legal advice about these issues, you need to be certain that your lawyer is familiar and up-to-date with the technology available. Does the lawyer who you are seeking legal advice from have a Twitter, Facebook, or LinkedIn account? Do they use an iPhone or Blackberry? If the answer to these questions are ‘no’ – don't be surprised if their advice is to avoid these “new” technologies.

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10 common California employment law mistakes by start-up companies

Start-up companies are usually saving every penny and operating on small margins. Simply the cost of defending an employment lawsuit could bring the entire venture into jeopardy. Here is a list of ten common California employment law mistakes made by start-ups:

  1. Assuming everyone can be paid a salary, and not paying overtime for hours over 8 in one day or 40 in one week. For a company to not pay overtime, it has the burden of proof to establish that the employee meets an exemption to California’s overtime laws. The exemptions are based on the amount of pay the employee receives and the duties the employee performs.
  2. Not researching particular laws that apply to the industry or city. For example, businesses in San Francisco have to provide for paid sick leave.
  3. Not having a meal and rest break policy. It goes without saying, every company in California needs a meal and rest break policy – and evidence that this policy is regularly communicated to employees.
  4. Not recording meal breaks. Employers are required to not only provide meal breaks, but also keep records of when the employee started and stopped the meal break.
  5. Not paying accrued vacation when employment is severed. Accrued and unused vacation is considered wages under California law, and needs to be paid out at the end of employment regardless of whether the employee is fired or quits.
  6. Overestimating the enforceability of covenants not to compete. Nine times out of ten, covenants not to compete are unenforceable in California.
  7. Underestimating the importance of an employee handbook.
  8. Assuming any worker can be classified as an independent contractor. Just like exempt employees, employers will bear the burden of proof when it comes to classifying independent contractors. Generally, the test is how much control the employer has over the worker.
  9. Withholding the money necessary to hire an HR manager knowledgeable with California law.
  10. Not reimbursing employees for business related expenses, such as travel expenses. Under Labor Code section 2802, employers are required to repay employees who pay for business related items out of their own pocket.
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CA Supreme Court denies review in Starbucks tip pooling case

The California Supreme Court denied review of a lower appellate court decision in the class action of Chau v. Starbucks. The issue in the case is whether store managers, who as part of their duties also served customers, could share in the tips which were left for all servers. The trial court took the technical line that Labor Code section 351 prohibits any "agent" of the employer from sharing in tips. At the trial court level, plaintiffs won a $105 million award for restitution over the disputed tips for a four year period.

However, on appeal, this award was reversed. In a favorable ruling for employers, the appellate court took a more common sense reading of Labor Code section 351, explaining:

There is no decisional or statutory authority prohibiting an employer from allowing a service employee to keep a portion of the collective tip, in proportion to the amount of hours worked, merely because the employee also has limited supervisory duties. Accordingly, we reverse the judgment and order the trial court to enter judgment in Starbucks's favor.

The Supreme Court’s decision not to review the appellate court’s decision establishes that decision as precedent and binding in California. Click here for a more detailed analysis of the appellate court's decision. 

However, employers are cautioned to review the appellate decision (and obtain legal advice) before allowing managers to share in tip sharing arrangements. For example, the Starbucks ruling involved the situation where there was a "collective tip box" that "a customer would necessarily understand the tip will be shared among the employees who provide the service” and that the managerial employee is part of the team that provided the service.

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Spokeo.com makes on-line social networking searches for job applicants easier and faster

Human resource professionals and hiring managers have developed a better way to gain insight into new hire’s backgrounds: information posted in social networking sites. About two years ago, I was often asked whether it was legal to google a job applicant, or to review his or her information posted on the Internet. While some lawyers took the conservative approach to this “new technology”, it has become common practice to search applicant’s backgrounds on the Internet (see this post about Court's ruling that MySpace postings are not private).  I’ve even made the case before that failure to do a simple Internet check could create liability for a company if the result could have easily informed the company that the applicant had a bad history. 

However, there are two basic problems now: (1) there are too many sites to search, and (2) if someone has a common name it is impossible to narrow the search to that particular person.  

Spokeo.com is a new company that basically makes these on-line background checks easier. Guy Kawasaki points out that this service can be very beneficial to an HR manager who is tasked with checking out applicants’ backgrounds by searching social networking sites. The key break through for the website is that it searches for an individual’s email address. This makes it very helpful to find particular information about an applicant that has a common name.

What is the cost?

It is $2.95 per month for one year, or $4.95 per month for three months. This seems well worth the cost to save hours searching social networking sites.

To try the service, click here.

Related articles:

Job Applicants Asked To Provide Their Passwords To Social Networking Sites


 

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Top ten mistakes employers make when drafting job descriptions

 

  1. Not drafting job descriptions because the employer believes that they are either useless or are not needed in small to medium sized companies. 
  2. Not listing the essential functions of the job (i.e., the primary purpose the job exists).
  3. Listing functions that are not the essential functions of the job as essential functions. Employers should separate these “other” functions as just that. Employers should also have language that specifies that the job may change, and employees may be required to perform other duties as required.
  4. Using legalese. Employers should use concrete terms that everyone can understand.
  5. Making the description too long.
  6. Using terms and/or abbreviations that only others in the company understand what they mean.
  7. Not updating job descriptions and simply use the ones drafted in 1990. Times are changing very fast, and an employer’s expectations of its employees in 1990 are probably vastly different than compared to 2009.
  8. Containing typos and poor grammar. A job description may be the critical document in employment litigation, a judge and/or jury may have to interpret the meaning of the job description, and therefore it is important to take time and care in drafting the language of the job description.
  9. Not referring to the job descriptions when conducting employee performance reviews or when addressing its liability against a potential ADA lawsuit.
  10. Not having outside legal counsel review the job descriptions (come on, you knew I had to put this one in).
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California Supreme Court holds employees' privacy rights not invaded by video surveillance

Plaintiffs Hernandez and Lopez were employed by Hillsides Children Center, Inc., which provided services to children with special needs and who were abused. Hillsides discovered that someone was accessing pornographic websites on a computer located in the Plaintiffs’ office late in the evening. 

The employer, citing its mission to protect abused children and to protect itself from any legal liability, installed a video camera in Plaintiffs’ office to identify the perpetrator. Because the websites were only being access at night, the video camera did not record any of Plaintiffs’ activities during the day, and was only turned on at night. The perpetrator was not caught.  But Plaintiffs’ discovered the video camera in the office, and filed this lawsuit for violation of their privacy rights.

The California Supreme Court noted that to succeed on their privacy claims, Plaintiffs would need to prove that:

  1. The plaintiff must possess a legally protected privacy interest,
  2. The plaintiff’s expectations of privacy must be reasonable, and
  3. The plaintiff must show that the intrusion is so serious in nature, scope, and actual or potential impact as to constitute an egregious breach of social norms.

The Court noted that Plaintiffs were able to establish violation of the first two elements in this case– that the employer intentionally intruded into the Plaintiffs’ office in which they had a reasonable expectation of privacy.

Offensiveness of the employer’s action

However, the Court held that Plaintiffs did not meet their burden of proof for the third element. First, the Court held that the degree and setting of the intrusion into Plaintiffs’ privacy was not very high. The Court noted that the “place, time, and scope” of defendant’s surveillance was not highly offensive. Second, the Court looked at the employers motive and justifications for conducting the surveillance – which had no element of being improper in this case. Given nature Hillsides’ business of helping abused children, it was taking proper action to prevent any possible harm to them. Given these factors, the Court found that the Plaintiffs could not, as a matter of law, prove that a reasonable person would find the intrusion into their privacy offensive.

Take away for employers

  • Do not assume that you have the right to monitor employees during working hours. As the case establishes, employees still have reasonable expectations of privacy at work.
  • Do not assume a computer monitoring policy applies to video and audio surveillance. The employer in this case tried to argue that the computer monitoring policy diminished Plaintiffs’ expectation of privacy at work, but the Court disagreed because the policy never mentioned the possibility that employees could be videotaped at work.

The case, Hernandez v. Hillsides, Inc. can be read here (PDF).
 

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When Do Employers Have To Pay For On-call Time?

The line between when employees are on or off the clock have become more and more grey with the advent of Blackberries, iPhones, and providing employees with remote login access from their homes. On-call time is considered compensable work time if it is spent primarily for the benefit of the employer and its business. In making this determination, the on call waiting time is spent predominantly for the employer’s benefit depends on two considerations: (1) the parties’ agreement, and (2) the degree to which the employee is free to engage in personal activities.

The Ninth Circuit Court of Appeals in Owens v. Local No. 169, Association of Western Pulp and Paper Workers (9th Cir. 1992) 971 F.2d 347, 350-355, provided a nonexclusive list of factors courts would examining in determining whether the employee was free to engage in personal activities (note that none of the factors is determinative by itself):

  1. whether there was an on premises living requirement;
  2. whether there were excessive geographical restrictions on employee’s movements;
  3. whether the frequency of calls was unduly restrictive;
  4. whether a fixed time limit for response was unduly restrictive;
  5. whether the on-call employee could easily trade on-call responsibilities;
  6. whether use of a pager could ease restrictions; and
  7. whether the employee had actually engaged in personal activities during call-in time.

In addition, the California Division of Labor Standards Enforcement published this guideline on call back time and stand by time. Employers need to conduct a review of each case when on-call time may be an issue in order to determine whether pay is owed.
 

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City Dress Code Requires Employees To Wear Underwear

A Florida city revised its dress code last week to require that employees wear underwear to work. The dress code also prohibits provocative clothing, halter tops and piercings other than in the employees’ ears. I was asked to speak on the subject of dress codes about two weeks ago. The timing was just a bit too late, and I missed this great illustration.

The story gets even better. The mayor of Brooksville cast the only opposing vote to implementing the new dress code, citing that a mandate to wear underwear “takes away freedom of choice.” This gives a new meaning to the term “pro-choice."

So is the city’s “pro-underwear” position legal?

Probably. Employers can generally set dress code standards for their employees as long as the policies do not discriminate on the basis of gender, race, religion, disability, or any other protected status.

If the dress code conflicts with an employee’s religion, an employer may have to analyze whether there is a reasonable accommodation that it can provide to the employee. In the context of providing an employee a reasonable accommodation for dress issues, the US Supreme Court noted that in the context of religion accommodations, employers do not have to provide accommodations that are more than a “de minimis” cost. See TWA v. Hardison 432 U.S. 63 (1977).

Employers also have to be aware of obscure state and local laws that may also prohibit employers from implementing other prohibitions. For example, here in California, the Government Code specifically addresses employees' right to wear pants to work. Section 12947.5 states:

(a) It shall be an unlawful employment practice for an employer to refuse to permit an employee to wear pants on account of the sex of the employee.
(b) Nothing in this section shall prohibit an employer from requiring employees in a particular occupation to wear a uniform.
 

While there are some laughs at the Florida city's expense, employers do need to pay close attention to their dress code policies to ensure that they are compliant.  Employers also need to ensure that HR is properly trained to deal with complaints and requests for reasonable accommodations when they arise.

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Job Applicants Asked To Provide Their Passwords To Social Networking Sites

The City of Bozeman, Montana asked job applicants to provide their user names and login information to common social networking sites on their job applications. As you may expect, this has caused a major uproar from privacy groups.

Just over one-year ago, I was asked by employers about what legalities were involved in Googling a job applicant, or looking at their on-line presence before making a hiring decision. It seems now, however, that once employees realized that their on-line presence is not so private, they began to restrict who could view this information on the Internet.

The city of Bozeman apparently was not happy with the increasing sophistication of people posting information on the Internet, resulting in it being shutout of viewing job applicants’ Facebook pages. So the city simply started to ask job applicants to provide their user names and passwords to social networking sites. The application provides:

Please list any and all current personal or business Web sites, web pages or memberships on any Internet-based chat rooms, social clubs or forums, to include, but not limited to: Facebook, Google, Yahoo, YouTube.com, MySpace, etc.

Many people and groups, such as the ACLU, have objected to this request arguing that it violates the job applicants’ privacy rights. As a result of the criticism it received, the city said that it will likely remove the request for user names and passwords, but may still require job applicants to “friend” the city in Facebook so that the city could still see what is posted.

I think this policy goes too far. Irrespective of the legal privacy questions raised, I do not think it would be a good hiring practice for an employer. I, for one, (and I think a lot of other people) would simply refuse to provide this information. If the city disqualifies job applicants who do not provide the information (which is claims it does not do), it is limiting its potential workforce of qualified people. Employees using these technologies are computer savy and are at least motivated enough to learn and try new technology. The job applicants who most likely will not have a problem in providing this information are those who do not know how to use a computer or the Internet and do not have any social networking accounts. Are these really the best qualified employees? In today’s workforce, a working knowledge of the Internet and social networking sites is almost a necessity. Businesses are learning about these new mediums and are discovering new ways of advertising and conducting business. It would be a detriment to not have employees who at least know what technology is available and is commonly used.

I also think that this incident will begin the discussion about people’s privacy interest in this type of information. The more and more people begin to “live” on the Internet, state legislatures will probably begin to define specifically what employers can and cannot ask for from employees.

Other articles of interest I’ve written related to employee's on-line privacy in the workplace:

California Appellate Court Holds Postings On MySpace.com Are Not Private

Can An Employer Be Liable For Not Googling A Job Applicant?

Google Latitude In The Workplace

 

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Massachusetts Employee Seeks Refuge From Noncompetition Agreement In California

The case of David Donatelli is a good reminder to employers how important choice of law provisions can be in noncompetition agreements. The Trade Secrets and Noncompete Blog recently chronicled a fight between EMC Corp (based in Massachusetts) and Hewlett Packard Co. (based in California) over the enforceability of a noncompetition agreement with a former high level EMC employee.

California courts have clearly established that noncompetition agreements are very difficult to enforce under California law, as explained further below. Therefore, once Donatelli left employment with EMC, the company raced to file a lawsuit against the former employee to prevent him from working with HP in Massachusetts. HP also raced to file a lawsuit in California barring EMC from enforcing the noncompetition agreement.

The Massachusetts court ruled first, finding that the agreement was enforceable under Massachusetts law, and that California law does cannot affect the court’s ruling. The court allowed Donatelli to present evidence establishing that his duties and job at HP did not directly compete with his former position at EMC. The court allowed Donatelli to work for HP in California given the fact that he proved there is minimal overlap between his new HP position and his former position at EMC.

Noncompetition Agreements In California

In California, noncompetition agreements are governed by Business & Professions Code section 16600, which states: “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.” The statute permits noncompetition agreements in the context of sale or dissolution of corporations (§ 16601), partnerships (§ 16602), and limited liability corporations (§ 16602.5).

Under the common law, as still recognized by many states today, contractual restraints on the practice of a profession, business, or trade, were considered valid, as long as they were reasonably imposed.

In 2008, the California Supreme Court ruled on the enforceability of noncompetition agreements under California in Edwards v. Arthur Andersen LLP. Arthur Andersen argued that California courts have held that section 16600 embrace the rule of reasonableness in evaluating competitive restraints.

The Court disagreed with Arthur Andersen, and noted:

We conclude that Andersen’s noncompetition agreement was invalid. As the Court of Appeal observed, “The first challenged clause prohibited Edwards, for an 18-month period, from performing professional services of the type he had provided while at Andersen, for any client on whose account he had worked during 18 months prior to his termination. The second challenged clause prohibited Edwards, for a year after termination, from ‘soliciting,’ defined by the agreement as providing professional services to any client of Andersen’s Los Angeles office.” The agreement restricted Edwards from performing work for Andersen’s Los Angeles clients and therefore restricted his ability to practice his accounting profession.

The Court found that this agreement was invalid because it restrained Edwards’ ability to practice his profession.

However, Arthur Andersen argued that section 16600 has a “narrow-restraint” exception and that its agreement with Edwards survives under this exception. Andersen pointed out that a federal court in International Business Machines Corp. v. Bajorek (9th Cir. 1999) upheld an agreement mandating that an employee forfeits stock options if employed by a competitor within six months of leaving employment. Andersen also noted that a Ninth Circuit federal court in General Commercial Packaging v. TPS Package (9th Cir. 1997) held that a contractual provision barring one party from courting a specific customer was not an illegal restraint of trade prohibited by section 16600, because it did not “entirely preclude[]” the party from pursuing its trade or business.

In refusing to accept the “narrow-restraint” exception for noncompetition agreements in California, the Court stated:

Contrary to Andersen’s belief, however, California courts have not embraced the Ninth Circuit’s narrow-restraint exception. Indeed, no reported California state court decision has endorsed the Ninth Circuit’s reasoning, and we are of the view that California courts “have been clear in their expression that section 16600 represents a strong public policy of the state which should not be diluted by judicial fiat.” [citation] Section 16600 is unambiguous, and if the Legislature intended the statute to apply only to restraints that were unreasonable or overbroad, it could have included language to that effect. We reject Andersen’s contention that we should adopt a narrow-restraint exception to section 16600 and leave it to the Legislature, if it chooses, either to relax the statutory restrictions or adopt additional exceptions to the prohibition-against-restraint rule under section 16600.

The Court’s ruling basically eliminated the validity of non-competition agreements under California that are not expressly provided for in Section 16600.

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Employee's Personal Data On Company Computers And Devices

The Wall Street Journal recently wrote about how employees are surprised after being given notice that they have been laid-off that they cannot retrieve personal (and business related) information from their computers. The author notes that with advances in technology that often times blur the boundaries between work and personal pursuits, many employees are hit really hard when they cannot retrieve their personal contacts from their work PDA or computer:

As layoffs sweep across industries, employees' personal information is winding up in the dustbin, as well. Most workers know better than to store personal files on their office computer. But employees who spend the majority of their time at the office often treat the company PC as their personal gadget, filling it with music, photos, personal contacts -- even using the computer's calendar to track a child's soccer schedule. That makes it all the more distressing when a newly laid-off worker learns that his digital belongings are company property.

The author correctly notes that what information is the employee’s as opposed to the employers is probably going to be set forth in and governed by the employer’s policies. Often times these policies will be provided to the employee when he or she first starts:

Employees worried about their job security should review the forms they signed when they were hired. They should look at the company's electronic communications policy, employee guidelines and non-compete agreements to make sure they understand everything properly. When employees sign these agreements, they should also make copies to save at home, too, Ms. Yancey says. Those that break these agreements risk being fired or sued by their employer, she adds.

It is important to note that in California, it is extremely difficult for employers to enforce non-competition agreements due to a California Supreme Court ruling in Edwards v. Arthur Andersen last year. California employers can still protect company information through other means, such as establishing that the information is a trade secret, or is proprietary information.

Steps California Employers Should Take To Avoid Litigation Over Electronic Data

  • California employers need to establish a clear policy that establishes that the employee does not have any privacy expectation in any data stored on company owned computers or devises.
  • The policy should establish that all aspects of an employee’s use of company equipment can be monitored.
  • Employers need to have the employees sign an acknowledgment of electronic data and monitoring policy.
  • The employer should remind employees of the electronic data policy at least every year.
  • If employers do have trade secrets, they need to maintain strict protocols to ensure that only employees with a “need to know” have access to the information and take steps to ensure that the information is protected.
  • If an employee who has been laid off requests personal information from his or her computer such as family pictures, an employer’s accommodation of this request will be somewhat of a step towards minimizing the employee’s ill-will towards the company (and less likely to pursue litigation against the company).
     
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"Direct Table Service" Is Not Required For Employees Participating In Tip Pools: Budrow v. Dave & Buster's

California restaurateurs received a huge victory from the Second District appellate court's ruling in Budrow v. Dave & Buster’s Of California, Inc. The lawsuit against Dave & Buster’s alleged that its tip pool policy violated California law in that it required employees to tip out bartenders who did not provide "direct table service." The court rejected Plaintiff’s argument that an employee had to have “direct table service” in order to validly participate in the tip pool.  As previously written, this is the second appellate court decision that reached the same result.

The court first explained that Labor Code section 351 does not impose a “direct table service” requirement on tip pools. The court explained that are two parts of Labor Code section 351 that are relevant to the “direct” and “indirect” table service issue. First, section 351 provides that “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.” Second, section 351 also provides that “[e]very gratuity is hereby declared to be the sole property of the employee or employees to whom it was paid, given, or left for.” Based on a plain reading of the Labor Code, the court rejected Plaintiff’s argument that there had to be direct table service for all employees who were a part of the tip pool.

Plaintiffs also argued that the “direct table service” requirement was established by prior case law in Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. The court rejected Plaintiff’s argument on four grounds:

  1. The Old Heidelberg case does not define “direct” as opposed to “indirect” service. The court noted that a bartender pouring a drink at the bar could be considered as providing direct table service. The court also noted that Old Heidelberg relied upon “industry practice” of tipping 15% to busboys and 5% to bartenders. Therefore the court could not agree that Old Heidelberg even defined “direct table service” for use as a requirement in this analysis.
  2. The “references to direct table service are made in Old Heidelberg without any attempt to fashion a rule that would limit tip pools to servers and busboys.”
  3. Old Heidelberg did not establish who which employees, if any, are to be excluded from the tip pools.
  4. Old Heidelberg did not decide which limitations on the types of employees are allowed to participate in tip pools, nor did it set forth “criteria or standards” to establish these limitations.

Therefore, the court held that there was no standard that only employees who provided direct table service are those who could participate in tip pools.

The court explained that “[t]ip pools exist to minimize friction between employees and to enable the employer to manage the potential confusion about gratuities in a way that is fair to the employees.” And the artificial distinction between “indirect” and “direct” table service is of no help.

The opinion can be downloaded from the court's website for a short period of time in PDF or Word.

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How Many HR Managers Have To Sit Through Interviews Like These?

I am sure HR managers have their share of funny interviewing tales - but I recently came across the How To Nail An Interview website (via Seth Godin).  The author of the site staged a fake company to see what type of applicants he would have for an open "marketing coordinator" position.  He recorded the interviews (yes - the first idea I had was if this was legal, but the author says he disclosed the fact that the participants might be recorded).  The outcome is hilarious.  

Readers should visit How To Nail An Interview, but here are a couple of my favorite interviews from the site.

Too much information on a Facebook profile :

Employee who does not want responsibility:

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Etheridge v. Reins International: Employees Who Do Not Provide Direct Table Service May Still Participate In Tip-Pools

 Another California Court of appeal ruled on the issue of tip-pooling in California. In Etheridge v. Reins International California, Inc., the court held that employees who do not provide “direct table service” may participate in tip-pools mandated by employers. (This holding confirms another recent appellate court's ruling in Budrow v. Dave & Buster’s Of California, Inc. on the same issue.)

The court set forth the issue in the case:

Tip-pooling, a practice by which tips left by patrons at restaurants and other establishments are shared among employees, is a common practice throughout California and the nation. No California statutes expressly address the practice. In this case, restaurant servers challenge the legality of a mandatory tip-pooling arrangement, whereby, as a condition of their employment, the servers must share tips with certain other employees at the restaurant. While the servers do not contest the requirement that bussers share in the tip pool, they challenge the inclusion of employees who do not provide “direct table service.”

The complaint alleged that Reins has a mandatory tip pooling policy by which its servers are required to “tip out” certain categories of Reins’s employees who do not provide direct table service. Specifically, it is alleged that servers are required to pay a share of their tips to the kitchen staff, bartender, and dishwashers.

Plaintiff alleged that because the tip-pooling policy at issue mandated that employees who do not provide direct table service (such as the kitchen staff) participate in the mandatory tip-pool violates Labor Code section 351, which governs gratuities.  

Tip Credits vs. Tip Pools

The Court clearly explained that tip credits and tip-pools are two different items and should not be confused. Tip credits, where the employer applies a portion of the employees’ tips against the employer’s obligation to pay minimum wage (which were not an issue in this case), are not valid in California:

The first is a practice known as a “tip credit,” by which an employer credits a certain amount of the tips received by an employee against the employee’s wages. In other words, when using a tip credit, the employer pays the employee less than minimum wage, with the understanding that the employee’s tips will make up the difference. As will be discussed at length, tip credits against minimum wage are permissible under the federal Fair Labor Standards Act (29 U.S.C. § 203(m)); tip credits against minimum wage were once permitted under California law, but were subsequently prohibited by statute. (Henning v. Industrial Welfare Com. (1988) 46 Cal.3d 1262, 1270-1275.)

Under tip pooling, employees who receive tips share the tips with other employees in the restaurant. As the court explained, there are different types of tip pooling arrangements:

This case raises the issue of precisely which other employees may participate in a tip pool. In one type of tip pool, the pool is designed to spread the risk of low tipping patrons among all tipped employees; thus, only tipped employees may participate in tip pools. In another type of tip pool; the pools are designed to share tips with non-tipped employees who are considered deserving of tips, but who, for some reason (perhaps tradition, or location) are generally not tipped by patrons.

Labor Code Section 351 - Gratuities

The primary issue of the case is the interpretation of Labor Code section 351.  The court examined the first California court opinion that addressed the validity of tip pools, Leighton v. Old Heidelberg, Ltd. (1990) 219 Cal.App.3d 1062. The court noted that while the Leighton court was primarily resolving the issue of requiring servers to "tip-out" bussers, that ruling also held that bartenders could participate in tip pools.  The Leighton court also stated that tips belong “to the employee[s] who contributed to the service of that patron.” Therefore, the court held that Leighton’s holding and rational extended to all employees who contribute to the service of customers, not just those who provide direct table service. 

The court also held that common sense dictates all employees should be able to participate in a tip-pool:

But a “direct table service” limitation would allow a busser to participate in a tip pool if the busser clears the plates while the patron is still seated at the table, but not to participate if the busser waits until after the patron has departed. The work is the same; the next patron still starts his dining experience with an equally clean table, but the busser who cleans between patrons would be barred from participating in the tip pool because he does not personally interact with any patrons. This illogical result casts doubt on any “direct table service” requirement.

Is this the last word on tip-pools in California? 

Probably not. Judge Croskey, who provided a concurring opinion, and Judge Klein, who provided a dissenting opinion on the "direct table service" issue, both called for the California Supreme Court to review this issue to provide further guidance.

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Managing Conflict In The Workplace

I completed two seminars (one for California and the other nationwide) last week for BLR on conflict management in the workplace, and I thought it would be a good time share a few additional thoughts on the topic. I’ve encountered a lot of skepticism about this topic – especially from other lawyers – that it is a “touchy feely” topic. I am not claiming a manager can learn everything she needs to know about the topic in one seminar, but it is clearly a skill that supervisors and managers need to develop to be successful. If there was not conflict in the workplace, or if it was simple to deal with, managers would be out of a job. Thankfully for managers, this skill is not easily learned, and takes years of experience to develop. Here are a few tips to assist in the process.

Don’t avoid or ignore workplace conflicts.

Letting conflict fester will lead to litigation. If managers get involved in workplace conflicts early and often, it is more likely that the situation will be dealt with before a party thinks their rights have been violated and they need a lawyer.

Have a discussion with both workers involved in the conflict together.

Lay a few ground rules for the discussion:

  • Everyone will be heard (the supervisor will have to enforce this rule)
  • One speaker and one conversation at a time
  • Challenges are acceptable, must be respectful
  • Focus on issue (project, assignment, task at hand, etc.)
  • The workers can only use “I” statements NOT “YOU” statements (Example: “I received the information too late to include in my report.” Not: “You got it to me too late.”)
  • No personal attacks – criticism must be of acts, not the other person (Example: “That project is a waste of company time.” Not: “You are wasting my time.”)
  • Set clear guidelines on what is expected of the workers on a going forward basis (It is recommended to document these steps.)

Know when conflict crosses the line to create legal liability.

Managers should always be thinking about whether the conflict crosses the line from simple workplace disputes or personality conflicts into actionable harassment, discrimination or retaliation.

Provide reprimands the right way.

Managers should think through how to approach an employee when giving them a warning, either verbal or written. Here are a few suggestions:

  • The warnings should not be administered in front of other employees.
  • The manager should think through how the discussion will go, and possible responses to different reactions from the employee.
  • Set out the clear expectation of what the employee needs to do to correct the problem.
  • Document the warnings – even verbal warnings to employees. If the warning is a written warning, have the employee sign the warning.  If they refuse to sign it, record on the document that the employee refused to sign.
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California Appellate Court Holds Postings On MySpace.com Are Not Private

The issue in Moreno v. Hanford Sentinel, Inc., as stated by the court, is:

… whether an author who posts an article on myspace.com can state a cause of action for invasion of privacy and/or intentional infliction of emotional distress against a person who submits that article to a newspaper for republication.

The case arose out of a college student, Cynthia Moreno’s, return to her hometown of Coalinga, California (which is somewhere between Sacramento and Los Angeles). 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 Cynthia’s full name (she only used her first name on MySpace). 

This must have been some ode, as the town became furious:

The community reacted violently to the publication of the Ode. Appellants received death threats and a shot was fired at the family home, forcing the family to move out of Coalinga. Due to severe losses, David closed the 20-year-old family business.

Because the information was published on MySpace.com, there could not be a cause of action for invasion of privacy.

The court held that publishing the ode on MySpace.com defeated any theory that the newspaper’s republication of the ode was an invasion of privacy. The court explained:

Cynthia’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. (Sanders v. American Broadcasting Companies (1999) 20 Cal.4th 907, 915.) Private is not equivalent to secret. (M.G. v. Time Warner, Inc. (2001) 89 Cal.App.4th 623, 632.) “[T]he claim of a right of privacy is not ‘“so much one of total secrecy as it is of the right to define one’s circle of intimacy -- to choose who shall see beneath the quotidian mask.”’ Information disclosed to a few people may remain private.” (Ibid., fns. omitted.) Nevertheless, the fact that Cynthia expected a limited audience does not change the above analysis. By posting the article on myspace.com, Cynthia opened the article to the public at large. Her potential audience was vast.

The court also held that the fact Cynthia removed the Ode from her online journal in six days does not change its analysis. “The publication was not so obscure or transient that it was not accessed by others.” The court also held that because Cynthia published the ode under only her first name on MySpace, but then the newspaper republished it under her first and last name is irrelevant. The court said her identity was readily ascertainable from the MySpace page – primarily because she posted her picture on the site.

While not directly an employment law case, the holding definitely has ramifications for employees who post information on the Internet. As discussed previously here and here, employers can view and possibly act upon information employees list on the Internet. This holding provides further support that employees (as everyone) should be very careful in what they post on the Internet.
 

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DOL Webinar On Employers' Obligations Under New COBRA Requirements

The DOL is offering a couple of webcasts to discuss employers’ and third parties’ obligations under the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provides for COBRA premium reductions and additional election opportunities for continuation coverage. The webcasts are an effort to assist employers in complying with the new requirements.

The presentation available from the DOL's site is about 2 hours long. I have not yet listened to the webcast, so I cannot recommend whether or not it is informative, but the price is right - free. Below are the PowerPoint slides used during the presentation:

COBRA Provisions Under Arra Anyone interested in listening to the webcast presented on March 24, 2009 can click here. The registration is fairly simple, but you will need RealPlayer on your computer (click here to download a free version).

Here are some other related links employers may find helpful:

Fact Sheet on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html

Model Notices
http://www.dol.gov/ebsa/COBRAmodelnotice.html

Department of Labor (DOL) FAQs on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html

Internal Revenue Service (IRS) FAQs on Premium Reduction Under ARRA
http://www.irs.gov/newsroom/article/0,,id=204708,00.html

Form 941
http://www.irs.gov/pub/irs-pdf/f941.pdf

Form 941 Instructions
http://www.irs.gov/pub/irs-pdf/i941.pdf

DOL COBRA Web page
www.dol.gov/COBRA

IRS COBRA Web page
http://www.irs.gov/newsroom/article/0,,id=204505,00.html
 

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Watch What You Say About Terminated Employees

In addition to wrongful termination claims brought by terminated employees, employers also face an additional cause of action for slander.  In a recent appellate decision, The Nethercutt Collection v. Regalia, the Plaintiff was terminated from his employment at a classic car museum. Regalia asserted causes of action for wrongful termination in violation of public policy, tortious interference with contract and advantageous business relations and opportunities, and slander. Regalia’s tortuous interference claim was dismissed prior to trial, and the jury rejected his wrongful termination claim. The jury found that Regalia had suffered no noneconomic damages, but still awarded him $750,000 in damages for harm to his reputation for statements made by Defendants about Regalia after he was terminated. Defendants appealed the jury’s finding.

Slander

The trial court focused on two statements made by the employer in this case for Regalia's slander claim. The first statement made by the employer was that Regalia demanded a finder’s fee for assisting the museum in acquiring a classic Talbot-Lago car worth $2.3 million, and that Regalia was not entitled to the fee. Second, the employer stated that other employees would not work for Regalia and would leave if he had remained employed.

Civil Code section 46 provides:

Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which: 1. Charges any person with crime, or with having been indicted, convicted, or punished for crime; 2. Imputes in him the present existence of an infectious, contagious, or loathsome disease; 3. Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits; 4. Imputes to him impotence or a want of chastity; or 5. Which, by natural consequence, causes actual damage.

A slander that falls within the first four subdivisions of Civil Code section 46 is slander per se and require no proof of actual damages. A Slander that does not fit into those four subdivisions is slander per quod, and special damages are required for there to be any recovery for that slander.

The appellate court rejected Regalia’s argument that the two statements at issue in the case are slander per se:

A person can make a claim for money that is rejected as not being justified, and still not be viewed as having committed an act that reflects negatively on that person. Thus a statement about such a claim does not necessarily “directly injure him in his profession, trade or business” (Correia v. Santos, supra, 191 Cal.App.2d at p. 852) so as to fit within subdivision (3) of Civil Code section 46. (See Gang v. Hughes (9th Cir. 1954) 218 F.2d 432 [alleged statements that a plaintiff’s attorney refused to settle a case until he was paid and that he was paid because he demanded immediate payment not slander or libel per se].) Likewise, the statement that Regalia was fired because other employees would not work for him and would leave if he remained employed does not, on its face, clearly fall within subdivision (3) of Civil Code section 46. That one or more employees do not want to work for someone, without more, again, does not necessarily reflect adversely on the person. The employee or employees might not want to work for a person because of the person’s work ethic or rectitude, or legitimate business policies. Those statements may by “natural consequence” cause plaintiff actual damages. (Civ. Code, § 46, subd. (5).) But that makes them slander per quod and requires proof of actual damages.

Therefore, the appellate court overturned the trial court because the jury specifically found that Regalia did not suffer actual damages.

Even though the employer succeeded in this case, it presents a good reminder to employers to be careful in communications to others about the reasons why certain employees were terminated. The best approach is to not discuss the reasons for an employee's termination with any emp