Happy Friday!  This Friday’s Five provides five legal requests and/or notices that, if ignored, can create huge liability for a California employer.

1. Requests for personnel records and time records

There are many different Labor Code provisions that obligate the employer to provide current and former employees with a copy of their personnel files and/or payroll records.  For example, Labor Code section 432 permits employees to obtain a copy of any document they signed, Labor Code section 1198.5 allows current and former employees to obtain copies of their personnel records, and Labor Code section 226(c) permits employees to inspect or copy payroll records within 21 days after making a request to do so.

2. PAGA notice

Employees seeking recovery under the Private Attorneys General Act (PAGA) must comply with requirements that place the Labor and Workforce Development Agency and the employer on notice that the employee will be seeking remedies under the Act and give the Agency a chance to investigate.  If the Agency does not investigate, then the plaintiff can proceed with the claim.  Employers have the the ability to cure some issues set forth in the plaintiff’s letter to the LWDA, which could bar the plaintiff from obtaining any penalties.  Plus, the PAGA notice usually results in litigation being filed shortly after receiving the notice, so employers should begin discussing defense strategies as soon as it receives a PAGA notice.

3. Labor commissioner or DOL investigation notice

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.  Under California law, the Labor Commissioner has subpoena power and the ability to review records and workplaces in order to enforce California employment laws.  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.

4. Subpoenas from third parties

Employers may 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, the employer 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 without being satisfied that the proper subpoena procedures and notice requirements, if applicable, have been met.  Employers have a duty to maintain the privacy rights of current and former employees, which includes personnel files.

5. Service of a Complaint

Ultimately, once a lawsuit is initiated, Plaintiffs will serve the complaint on the registered agent of the company.  Generally speaking, defendants have 30 days to respond to a complaint once served.  It is important to immediately begin assessing the company’s rights and obligations once a complaint has been served in order to ensure its rights are protected.  If a company does not timely respond to a lawsuit, entry of default judgment could be entered against the company, which could result in providing the plaintiff a judgment in the full amount of damages sought.

California employers are required to provide non-exempt employees with certain information upon hire as required by the Wage Theft Protection Act.  The law became effective in 2012 and is codified at Labor Code section 2810.5.  Many employers use the Labor Commissioner’s template (embedded below) to meet their legal requirement, and will pre-populate the items in the form that do not change from employee to employee, lessening the information required to be completed on the form for each employee.

Many employers that have employees working at the minimum wage will pre-populate the wage information section of the form with the minimum wage rates and the applicable overtime rates based on that minimum wage rate.  However, with the increase in California’s minimum wage in 2016 state wide and also in many local areas (such as Los Angeles and Santa Monica), employers should review and update the wage information section on the Notice to Employee.

Do employers need to re-issue the Notice To Employee for all employees given the higher minimum wage?

No.  Employers are not required to re-issue the Notice to Employee to existing employees with updated wage information as long as new increased rate is show on the employee’s pay stub with the next payment of wages.  The DIR publishes a great FAQ on the law here that employers should review.

The EEOC recently disclosed its fiscal year 2015 performance report.  The report is a good reminder to employers of the issues that they may likely face EEOC scrutiny.  Here are five key statistics employers should pay attention to:

1.     EEOC obtained more than $525 million in discrimination suits. 

Of this amount, the parties settled disputes for $356.6 million, and obtained $65.3 million through litigation.

2.     “Systemic” discrimination investigations and litigation.

The EEOC resolved 268 “systemic investigations” of discrimination claims prior to litigation, resulting in more than $33.5 million in settlements.  Systemic discrimination is defined by the EEOC as discrimination that “involves a pattern or practice, policy, or class case where the alleged discrimination has a broad impact on an industry, profession, company or geographic area.”  Some examples of “systemic” discrimination provided by the EEOC are discriminatory barriers in recruitment and hiring, discriminatory restricted access to management trainee programs and to high level jobs, and exclusion of qualified women from traditionally male dominated fields of work.  A list of recent cases provided on the EEOC’s website illustrates some examples: Outback Steakhouse settles $19 million suit for sex bias claims by women in a “glass ceiling” suit; Albertson’s settles $8.9 million suit alleging job bias based on race, color, and national origin.

The agency did not disclose how much it obtained in litigation, but it disclosed that it resolved 26 systemic cases.  Six of those included at least 50 plaintiffs, and 13 that included at least 20 plaintiffs.

3.      EEOC’s training programs. 

The agency claims to have reached 336,855 people through providing 3,700 educational, training and outreach evetns.  The agency’s Training Institute trained over 12,000 people at 140 events that “focused on the agency’s Strategic Enforcement Plan (SEP) priorities, including small businesses, vulnerable workers, underserved geographic areas and communities….”

4.     Number of charges filed with EEOC remained relatively unchanged from 2014. 

The EEOC received 89,385 in FY 2015.  This is slightly up from the 88,778 charges received by the agency in FY 2014.  This is down from the number of charges filed in 2013 (93,727 charges).

In 2015, the agency resolved 44% of its conciliations, which are mediations conducted by the EEOC to resolve employment disputes.

5.     EEOC litigation efforts.

The agency filed 142 lawsuits alleging discrimination for FY 2015.  Of the lawsuits, 100 were individual lawsuits and 42 were cases “involving multiple victims or discriminatory policies (versus discriminatory treatment), of which 16 were systemic suits.”  During 2015, the agency resolved 155 lawsuits alleging discrimination, and has 218 active cases.  Of these active cases, 48 (22%) alleged systemic discrimination and 40 (18%) were “multiple-victim cases.”

 

California employers must remember that the EEOC is a federal agency responsible for enforcing Federal discrimination laws.  California employers also need to comply with California discrimination laws, which are enforced through California’s Department of Fair Employment and Housing (DFEH).  Wage complaints are handled through the federal Department of Labor or California’s Labor Commissioner.

I can hear the questions already, just five new laws taking effect on January 1, 2016?  No, there are many more, as I have previously written about, but here are five additional new laws employers need to understand going into 2016.

1.     Family members of whistleblower are granted protections and some employers are excluded from the joint employer liability enacted in 2015

AB 1509 – Effective January 1, 2016, this bill prohibits employers from retaliating against an employee who is a family member of an employee who made a protected complaint.  The bill extends the protections to an employee who is a family member of a person who engaged in, or was perceived to engage in, the protected conduct or make a complaint protected the law.  This bill also amends Labor Code section 2810.3 to exclude certain household goods carrier employers from the joint liability imposed between the client employer and a labor contractor.

2.     Labor Commissioner Provided Increased Enforcement Authority Over Local Ordinances and the Ability to Issue Awards For Expense Reimbursement

AB 970 – Effective January 1, 2016, provides the Labor Commissioner with authority to investigate and at the request of the local government, to enforce local laws regarding overtime hours or minimum wage provisions.  The Labor Commissioner has authority to issue citations and penalties for violations, but cannot issue violations if the local entity has already issued a citation for the same violation.  The bill also authorizes the Labor Commissioner to enforce Labor Code section 2802 which requires employers to pay for business related costs that the employee directly incurs in discharging their duties for the employer.

 3.     Labor Commissioner Provided Increased Judgment Collection Authority

SB 588 – Amends the Labor Code to provide the Labor Commissioner many more rights in collecting judgments against employers who are found liable for unpaid wages.  The Labor Commissioner has authority to issue a lien against on an employer’s property for the amount of the judgment.  Also, the law also imposes personal liability for employers in adding Labor Code section 98.8(f):

 Any person who is noticed with a levy pursuant to this section and who fails or refuses to surrender any credits, money, or property or pay any debts owed to the judgment debtor shall be liable in his or her own person or estate to the Labor Commissioner in an amount equal to the value of the credits, money, or other property or in the amount of the levy, up to the amount specified in the levy.

Also, if an employer has a judgment entered against it, and it is not paid within 30 days after the time to appeal the judgment, the employer is required to obtain a bond in order to continue to do business in California. Effective January 1, 2016

 4.     Employee’s Permitted Time Off From Work Expanded

SB 579 – Existing law prohibits an employer who employs 25 or more employees working at the same location from discharging or discriminating against an employee who is a parent, guardian, or grandparent having custody of a child in a licensed child day care facility or in kindergarten or grades 1 to 12, inclusive, for taking off up to 40 hours each year for the purpose of participating in school activities, subject to specified conditions.  The law is amended to provide these protections for employees under a broader “child care provider”, and applies these protections to employees who are a stepparent, foster parent, or who stands in loco parentis to a child.

The bill also amends California’s Kin Care law set forth in Labor Code section 233 to require employers to allow employees to use “an amount not less than the sick leave that would be accrued during six months” for family members as defined in the Healthy Workplaces, Heathy Family Act of 2014, otherwise known as California’s paid sick leave law.  The Kin Care law is amended under this bill to provide that employers must allow employees to use up to one-half of their sick leave to attend to victims of domestic violence or the diagnosis, care, or treatment of an existing health condition of, or preventive care for, the employee or the employee’s family member.  Family member definition is broadened from the existing definition under the law (a child, parent, spouse, or domestic partner) to also include grandparents, grandchildren, and siblings.  Effective January 1, 2016.

  5.     Limits Placed on Employer’s Use of E-Verify

AB 622 – Effective January 1, 2016, this bill adds Labor Code section 2814 which expands the definition of an unlawful employment practice to include an employer or any other person or entity using the E-Verify system when not required by federal law to check the employment authorization status of an existing employee or an applicant who has not received an offer of employment, as required by federal law, or as a condition of receiving federal funds. The bill also requires an employer that uses the E-Verify system to provide to the affected employee any notification issued by the Social Security Administration or the United States Department of Homeland Security containing information specific to the employee’s E-Verify case or any tentative nonconfirmation notice “as soon as practicable.”  The bill provides for a civil penalty of $10,000 for an employer for each violation of its provisions.

It is a good time to review employee policies and handbooks to ensure they are compliant with the new requirements.

Earlier this week Uber appealed a California Labor Commissioner ruling against it holding that a driver was misclassified as an independent contractor.  In this video, I briefly discuss the ruling and the lesson it holds for employers.

Misclassification of employees as independent contractors can carry many damages and penalties.  For example, Sections 226.8 and 2753 of the Labor Code impose a civil penalty of $5,000 to $25,000 depending on whether the misclassification is willful.  In addition, the misclassified worker can recover back unpaid overtime wages, unpaid minimum wages, and expense reimbursement.  Therefore, employers need to be extremely cautious in classifying workers as independent contractors.

For more information about the factors that differentiate an employee from an independent contractor click here.

The Labor Commissioner’s can be viewed here:

Is your company in an industry that is likely to be targeted by the Department of Labor (DOL) for FLSA violations, or by the California Labor Commissioner for California Labor Code violations? A review of the Department of Labor’s Wage and Hour statistics for fiscal year 2014, in connection with California’s Division of Labor Standards Enforcement most recent reporting for 2012-2013, establishes a clear pattern of industries that are targeted for wage and hour violations:

  1. Restaurants
  2. Garment manufactures
  3. Guard services
  4. Car washes
  5. Agriculture

Here is a summary of the DOL’s statistics:

DOL 2014 Statistics

Here is a summary of California’s DLSE’s most recent statistics:

DLSE 2012-13 wages collectedWhile there are some differences between the two agencies’ statistics, restaurants lead both lists. It is also important to note that not every business can fit into these predetermined categories (note that the “other” category in the DLSE’s lists is very large), so there are many other industries affected.

It is also important to note the amount collected from the various industries that the DLSE found was due. According to the DLSE, the worse collection efforts was in the garment industry, with only 2.8% of the wages found to be due were actually collected. The next lowest collection rate per industry was in the car wash industry at only 10% collection rate. It is important to review these collection rates, because it is informative about how the DLSE or DOL will view your particular establishment when investigating potential claims. The lower collection rates are probably due to the result of the employer’s simply going out of business or taking other steps to avoid collections of the penalties and fines, or what I refer to as the bad actor presumption (rightly or wrongly).

Bad actor presumption (rightly or wrongly)
Imagine if you were in charge of collecting the penalties issued by the DLSE or DOL, these collection figures would color your view of employers operating in these industries. Going into the investigation, the government already has a predisposition that certain employers are more likely to have violations, and then when told they must pay fines, the employer likely to still simply refuse to abide by the determination. I’m not making a presumption that these penalties and fines were rightly or wrongly issued, but am only commenting about how these numbers skew the view from the perspective of the governmental agency. The agencies go through the process of making a determination and issue a citation, and then even after the determination has been made and the employer had an opportunity to appeal the agencies’ determination, the employer still refuses to pay the citation. In effect, employers therefore are harming the reputation of every business operating in that industry, and make it more difficult to overcome the predisposition the investigator has about the particular industry.

This illustrates the importance of companies operating in these targeted industries to be especially vigilant about compliance with Federal and California employment laws. An employer can gain a higher level of credibility with the investigator if they can show compliant policies, good record keeping, and proper payment of wages. Next week I will discuss violations most likely to be assessed by the DOL or the DLSE.

You may recall from your college business law class of the “American rule” regarding attorney’s fees: generally in the United States each side is responsible to their own attorney’s fees, and unlike other countries, the loser does not have to pay the other party’s attorney’s fees. Employers can basically ignore this general rule in employment litigation under California law. I debated about writing this article because once a lawsuit is filed, employers don’t have any control over what claims and damages the plaintiff will assert, so why would employers need to understand when they have exposure to a current or former employee’s attorney’s fees in litigation? However, employers need to understand the underlying liability of potential claims, the motivations behind those claims, and the major part of many employment law claims can be attorney’s fees. And as shown below, the California legislature has used the award of attorney’s fees to shift the risk in many actions against employers, and it is a concept that employers need to understand to address liability and litigation strategies. Here are five California employment related statutes that can expose employers to a plaintiff’s attorney’s fees:

1. Minimum wage/unpaid overtime claims. Labor Code section 1194, provides attorneys fees for plaintiffs who recover damages for minimum wage or overtime violations:

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 … reasonable attorney’s fees, and costs of suit.

2. Unsuccessful appeal of Labor Commissioner Claim. In order to discourage appeals from Labor Commissioner rulings, California Labor Code section 98.2(c) requires the court “shall” awards costs and reasonably attorney’s fees to the other party. This section permits the employee to obtain fees on an unsuccessful appeal by the employer, or to the employer who prevails on an unsuccessful appeal by employee. The catch for employers however, is that Labor Code section 98.2(c) provides that the employee is “successful” and therefore entitled to attorney’s fees “if the court awards an amount greater than zero.” Yes, even if the employee receives $1, they are successful in the appeal, and are entitled to their attorney’s fees. Therefore, employers have a huge disincentive in appealing Labor Commissioner rulings.

3. Expense reimbursement claims Labor Code section 2802 provides that employers must pay for and reimburse employees for “all necessary expenditures or losses incurred by the employee in direct consequence” of the employee’s job. Therefore, items like mileage reimbursement, even personal cell phone expenses, or other out-of-pocket expenditures employees make while performing their job must be reimbursed by the employer. Labor Code section 2802(c) provides that the employee is entitled to “attorney’s fees incurred by the employee enforcing the rights granted by this section.”

4. Private Attorney General Act (PAGA) claims Plaintiff’s counsel bringing a PAGA claim can seeks attorney’s fees under this statute as well. See Labor Code section 2699(g). Plaintiffs’ attorneys also claims fees under California Code of Civil Procedure section 1021.5, which permits them to recover fees if the case “resulted in the enforcement of an important right affecting the public interest” if certain requirements are satisfied.

5. California’s Fair Employment and Housing Act (FEHA) The Fair Employment and Housing Act (FEHA) prohibits harassment and discrimination in employment based on protected categories and/or retaliation for protesting illegal discrimination related to one of these categories. “In civil actions brought under [FEHA], the court, in its discretion, may award to the prevailing party . . . reasonable attorney’s fees and costs, including expert witness fees.” (Gov. Code, § 12965, subd. (b).) Under FEHA, the fee shifting provision goes both ways, to the plaintiff but also potentially the employer. Courts have discretion to award the defendant employer attorney’s fees and costs as the prevailing party in cases where plaintiff’s claim is deemed unreasonable, frivolous, meritless or vexatious. As a California court recently explained:

Despite its discretionary language, however, the statute applies only if the plaintiff’s lawsuit is deemed unreasonable, frivolous, meritless, or vexatious. . . . ‘ “[M]eritless” is to be understood as meaning groundless or without foundation, rather than simply that the plaintiff has ultimately lost his case . . . .’

Robert v. Stanford University, 224 Cal.App4th 67 (2014).

This Friday’s Five is a bit early this week, but I have to post today as my blog is going through some upgrades and I will not be able to post this tomorrow (Friday). I’ve previously written about what Labor Commissioner hearings are (also known as Berman Hearings here in California) and how to prepare for the hearings. This post is more generally about the strategy during Labor Commissioner hearings, and items to remember while completing the process.

1. Be courteous to everyone during the process.
Be nice to the clerk checking people in at the Labor Commissioner’s office. Be nice to the Deputy Labor Commissioner hearing the claim. And yes, be nice to the claimant. You can be nice while still aggressively defending your position, just don’t be a jerk about it. I can hear other lawyers criticizing this advice already with the idea that you do not want to make the process pleasant for the other side in order to deter this type of behavior. I disagree with this approach. First, once the claim is resolved, it is generally binding on the parties, so by making the process unpleasant on the claimant, it will not be deterring any other actions. Second, the hearing officers are human beings, if they get the sense that you (or your opponent) are the unreasonable party creating the conflict, they are probably going to find against you.

2. Do not take it personally.
Because Labor Commissioner claims can be relatively small, and parties do not need to be represented by a lawyer, many parties represent themselves during the process. However, just like negotiating someone’s salary, employers need to view the process as a business transaction, not a personal attack. If it is too hard to separate the personal issues from the process, it is best to hire a lawyer to help make the arguments for the company and to help take the personal aspect of the process out of the equation.

3. Read the DLSE’s website for the Labor Commissioner’s view of the law.
The DLSE has a great website setting out its position on some aspects of California labor law. While the DLSE’s view expressed on its website is not necessarily binding on the parties, it is a good starting point regarding what issues the company will likely be challenged on during the proceeding.

4. Make the record.
The actual Labor Commissioner hearing is tape recorded, and the parties and any potential witnesses give testimony under oath during the proceeding. Therefore, because there is a record of testimony provided under oath, if the case is appealed to superior court by either party after the hearing, this testimony will be very important in subsequent proceedings.

5. Don’t make the wrong record.
This goes back to being prepared. All parties have to be truthful as they are sworn in, but be careful in your testimony. Think through all of the facts before the hearing. If you wrongly recall facts or begin to guess at answers during the Labor Commissioner hearing, and then try to correct those facts at a subsequent proceeding, it will adversely affect your credibility. Think through your testimony before the hearing in order to be as accurate as possible.

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.
 

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.