As 2021 is quickly coming to an end, this article focuses on five steps employers can take in preparation for 2022:

1. Update employee handbooks to comply with AB 1033 which expanded the definition of family members covered under the California Family Rights Act.

AB 1033 passed in 2021 and takes effect on January 1, 2022, adds parents-in-law to the definition of “parent” for purposes of qualifying leave under the California Family Rights Act (CFRA).  As a reminder, effective January 1, 2021,  SB 1383 took effect that requires employers with 5 or more employees to comply with the CFRA.  Employers with as few as five employees must provide up to 12 weeks of unpaid job protected leave during any 12-month period for certain covered reasons.  In addition, the definition of family members covered under the CFRA was expanded under SB 1383 so that it no longer just includes a spouse, a parent or a child, but employees can take leave to care for grandparents, grandchildren, siblings, or domestic partners with a serious health condition. Employers should review their CFRA policies to ensure compliance with these recent changes.

2.  Review new hire packets and documents to ensure employees are receiving all required documents, and the most current versions of the required documents.

California employers are required to provide certain information and forms to new hires.  For example, 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 (available here) 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.

Our prior article here covers general considerations for employers to develop a checklist specific for their company.

3. Exempt employees – review and update salary to ensure minimum threshold is paid.

Employers need to review the base salary for all exempt employees to ensure the employees meet the salary required to be exempt.  To be exempt from the requirement of having to pay overtime to the employee, the employee must perform specified duties in a particular manner and be paid “a monthly salary equivalent to no less than two times the state minimum wage for full-time employment.” (Lab. Code, § 515, subd. (a).)  For more information about the salary basis test for exempt employees, see our previous article here.

With the increase in the state minimum wage on January 1, 2022, the equivalent of two times the minimum wage of $14 per hour for small employers (25 employees or less) equals $58,240 per year ($1,120 per week), and two times the minimum of $15 per hour for large employers (26 employees or more) equals $62,400 per year ($1,200 per week) to qualify for the white collar exemptions.

It is important to note that the salary basis test is set according to the California state minimum wage, not the applicable minimum wage that may apply in the various local city and counties in California.

4. Update severance agreements to ensure they comply with recent developments.

AB 331 was approved by the Governor on October 7, 2021, and its provisions applies to employment agreements (specifically severance agreements, settlements agreements, or a release of claims) entered into on or after January 1, 2022.  AB 331, known as the “Silenced No More Act,” amends Code of Civil Procedure Section 1001 and prohibits settlement agreements filed in “a civil action” or a complaint in “an administrative action” from preventing the disclosure of factual information related to the claim.  This applies to claims for sexual harassment, as well as workplace harassment, discrimination, or retaliation based on any other protected characteristic under California law.

AB 331 also prohibits employers from requiring employees to sign an agreement (a nondisparagement agreement or any other document) that would restrict the employee’s ability to disclose information about unlawful acts in the workplace.

The law also requires the following disclosure in an agreement that contains a non-disparagement provision or any other restriction on the employee’s ability to disclose information related to workplace conditions: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”

In terms of separation/severance agreements, the new law requires employers to notify the employee that they have at least five days to consider the agreement and that they have a right to consult an attorney.  The employee may sign the agreement prior to the expiration of this five-day period.

More information about AB 331 can be read in our prior article here.

5. Begin preparing in order to meet the March 31, 2022 deadline for California’s payroll reporting requirement.

California employers will need to comply with the March 31, 2022 deadline to report certain payroll data to the Department of Fair Employment and Housing (DFEH).  Yes, it is only the beginning of December, but for large employers, they should begin the process of gathering this information at the beginning of 2022 in order to meet the March deadline.  As a reminder, SB 973, passed in September 2020 that created a new obligation for California employers to annually submit pay data report to the DFEH.  The DFEH has recently published a frequently asked questions page clarifying some questions about SB 973.  Our prior article on which employers must comply and other requirements of the law can be read here.

AB 331 known as the “Silenced No More Act,” was approved by the Governor on October 7, 2021, and its provisions applies to employment agreements, such as severance agreements, settlements agreements, or a release of claims.  Here are five items employers should understand about AB 331:

1. When does AB 331 take effect?

AB 331 applies to agreements entered on or after January 1, 2022.

2. AB 331 broadens the categories that employers cannot restrict employees from disclosing.

AB 331 amends Code of Civil Procedure Section 1001 and prohibits settlement agreements filed in a civil action or a complaint in an administrative action from preventing the disclosure of factual information related to the claim.  This applies to claims for sexual harassment, as well as workplace harassment, discrimination, or retaliation based on any other protected characteristic under California law.  AB 331 builds on the laws passed in 2018 from the #metoo movement, which prohibited employers from preventing employees or former employees from discussing claims and facts related to sexual harassment in the workplace.  AB 331 broadens this prohibition to apply to any type of workplace harassment or discrimination.

AB 331 also prohibits employers from requiring employees to sign an agreement (a nondisparagement agreement or any other document) that would restrict the employee’s ability to disclose information about unlawful acts in the workplace.

3. AB 331 requires certain disclosures be made in agreements with employees.

The law also requires the following disclosure in an agreement that contains a non-disparagement provision or any other restriction on the employee’s ability to disclose information related to workplace conditions: “Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.”

Employers providing an employee or former employee a severance agreement must also notify the employee that they have a right to consult an attorney regarding the severance agreement.

4. Employers must provide employees with at least five days consider severance agreements.

For separation and severance agreements, the new law requires employers to notify the employee that they have at least five days to consider the agreement.  The employee may sign the agreement prior to the expiration of this five-day period.

5. Review employee agreements to ensure they are compliant.

Employer should review and potentially update employment documents, which may include the following types of employment-related documents:

  • severance agreements
  • standard release of claims, and settlement agreements
  • non-solicitation agreements
  • confidentiality agreements
  • nondisclosure agreements

As we enter the holiday season, it is a good time to review employer’s obligations to accommodate requests for time off for holidays and best pay practices during the holiday season.  This Friday’s Five covers five reminders for employers about holiday leaves and pay:

1. California employers are not required to provide employees time off for holidays.

There is no requirement that California employers provide time off (except for religious accommodations – see below) for holidays. California’s DLSE’s website states the following:

Hours worked on holidays, Saturdays, and Sundays are treated like hours worked on any other day of the week. California law does not require that an employer provide its employees with paid holidays, that it closes its business on any holiday, or that employees be given the day off for any particular holiday.

2. California employers are not required to pay for time off for holidays, nor are they required to pay additional wages if employees work on holidays.

Likewise, there is no requirement that employers pay employees extra pay or “holiday pay” for work performed on holidays. Employers can voluntarily agree to pay employees extra pay for work that is required during holidays, but these terms would be governed by policy set forth by the employer. Therefore, employers are urged to make sure their holiday pay policies are clearly set forth.

California’s legislature has proposed bills that would require certain employers to pay employees double time for work done on Thanksgiving, but none of these bills have become law.  For example, the “Double Pay on the Holiday Act of 2016” proposed to require an employer to pay at least 2 times the regular rate of pay to employees at retail and grocery store establishments on Thanksgiving. None of these attempts by the legislature have been successful (yet) in requiring California employers to pay any extra “holiday pay.”

3. Employers must provide reasonable accommodations for employees who cannot work on certain holidays due to religious observances.

Employers need to be aware of any religious observances of their employees since employers need to provide reasonable accommodations for employees due to religious reasons. The analysis of reasonable accommodation is required is a case-by-case basis analysis based on the company’s type of business and the accommodation requested by the employee. If the employer’s operations require employees to work during normally recognized holidays, such as a restaurant, then this should be communicated to employees in the handbook or other policies and set the expectation that an essential function of the job requires work during normal holidays.

4. If an employer pays for time off during holidays, the employer does not have to allow employees to accrue holiday paid time off.

If an employer pays for time off during certain holidays, if an employee leaves employment before the holiday arrives, the employer is not required to pay the employee for the day off.  But the employer’s policy regarding holiday pay must clearly set forth that this benefit does not accrue to employees and that they must be employed during the specific holidays to receive the holiday pay.  Often employers will also require employees to work the days leading up to and following the holiday in order be eligible for the holiday pay.

5. If a pay day falls on certain holidays, and the employer is closed, the employer may process payroll on the next business day.

If an employer is closed on holidays listed in the California Government Code, then the employer may pay wages on the next business day.  The DLSE’s website sets forth this requirement, and other considerations, regarding the timing obligations for payroll.  The holidays listed in the Government Code section 6700 are as follows:

  • Every Sunday
  • January 1 — New Year’s Day
  • Third Monday in January — Martin Luther King Jr. Day
  • February 12 — Lincoln’s Birthday
  • Third Monday in February — Washington’s Birthday
  • March 31 – Cesar Chaves Day
  • Last Monday in May — Memorial Day
  • July 4 — Independence Day
  • First Monday in September — Labor Day
  • September 9 – Admission Day
  • Fourth Friday in September – Native American Day
  • Second Monday in October — Columbus Day
  • November 11 — Veterans Day
  • December 25 — Christmas
  • Good Friday from 12 noon to 3 p.m.
  • Other days appointed by the governor for a public fast, thanksgiving or holiday

AB 654 is a new law that took effect on October 5, 2021 and modified California employer’s duty to notify workers of a potential COVID-19 exposure at the workplace.  The new law modifies and updates AB 685 which became effective on January 1, 2021 (see our post discussing AB 685 here).  The new law is a reminder for employers that while business begin to reopen and employees return to work, employers must remain diligent in regard to these ongoing COVID-19 regulations in California.  Here are five key aspects of AB 654 employers need to review:

1. Employers must notify employees (1) who had a potential exposure and (2) employees who had close contact within one business day.

Employers are required to provide written notice to all employees, and the employers of subcontracted employees, who were on the premises at the same “worksite” as the “qualifying individual” within the “infectious period” that they may have been exposed to COVID-19.

AB 654 adds a new requirement that employers are also required to provide a written notice to any employees who had “close contact” with the qualifying individuals.  “Close contact” is defined at “being within six feet of a COVID-19 case for a cumulative total of 15 minutes or greater in any 24-hour period within or overlapping with the high-risk exposure period….”

The new law defines “high-risk exposure period” as either of the following periods: “(A) For persons who develop COVID-19 symptoms, from 2 days before they first develop symptoms until 10 days after the symptoms first appeared, and until 24 hours have passed with no fever, without the use of fever-reducing medications and symptoms have improved. (B) For persons who test positive who never develop COVID-19 symptoms, from 2 days before until 10 days after the specimen for their first positive test for COVID-19 was collected.”

“Qualifying individual” is defined as any person who has any of the following (1) a laboratory-confirmed case of COVID-19 as defined by the State Department of Public Health, (2) a positive COVID-19 diagnosis from a license health care provider, (3) a COVID-19-related order to isolate provided by a public health official, or (4) died due to COVID-19, in the determination of a county public health department or per inclusion in the COVID-19 statistics of a county.

“Infectious period” in the statue refers to the definition as set by the State Department of Public Health.  Prior guidance of the State Department of Public Heath stated the infectious period “includes, at a minimum, the 48 hours before the individual developed symptoms.” (See https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/COVID-19/Workplace-Outbreak-Employer-Guidance.aspx)

The notice must be in a form that is usually used to communicate with employees, and can be by personal delivery, email, or text message as long as the notice is reasonably believed to be received by the employee within one business day of delivery. The notice must be in both English and in the language understood by a majority of employees.

2. Employers must provide information about COVID-19-related benefits to certain employees.

Employer must also provide information to all employees who were on the premises at the same worksite as the qualifying individual within the infectious period with information regarding COVID-19-related benefits available under federal, state, and local laws.  This information would include workers compensation benefits, options for exposed employees, including COVID-19-related leave, company sick lease, state-mandated leave, supplemental sick leave, or negotiated leave provisions.  This notice must also set forth antiretaliation and antidiscrimination protections for the employee.

3. Notice to employees must also include the cleaning and disinfection plan of the employer.

The new law clarifies that the obligation of employers notify employees of cleaning and disinfection plan only applies to employees who were on the premises at the same worksite as the qualifying individual within the infectious period, and employers of subcontractor employees.  The prior law required this notification for all employees, regardless if they were on site, or potentially exposed.  The cleaning and disinfection plan must meet the guidelines of the federal Center for Disease Control and Prevention and the COVID-19 prevention program per the Cal-OSHA COVID-19 Emergency Temporary Standards.

4. AB 654 changes the deadline to notify the local public health agency of outbreaks.

If an employer has an “outbreak” in its workforce, within 48 hours or one business day, whichever is later, the employer must notify the local public health agency in the jurisdiction of the worksite of the names, number, occupation and worksite of “qualifying individuals.” An “outbreak” for AB 654 is currently defined as: “[a]t least three probable or confirmed COVID-19 cases within a 14-day period in people who are epidemiologically-linked in the setting, are from different households, and are not identified as close contacts of each other in any other case investigation.” (see https://www.cdph.ca.gov/Programs/CID/DCDC/Pages/COVID-19/OutbreakDefinitionandReportingGuidance.aspx).  Under the prior law, AB 685, employers only had 48 hours to report outbreaks to the local public health agency.

5. AB 654 clarifies the definition of “worksite.”

The new law clarifies that a “worksite” does not mean a worker’s personal residence or alternative work location chosen by the worker when working remotely.  As previously provided under the old law, AB 685, the new law in AB 654 continued to adopt the standard that at a multiworksite location, the employer only needs to notify employees who were at the same worksite as the qualified individual.

My firm is hosting a webinar on Wednesday, November 17, 2021 from 10 to 11 a.m. PT discussing this and other new laws facing California employers in 2022.  Registration for the webinar is here.

On Saturday, November 6, 2021, the United States Court of Appeals for the Fifth Circuit blocked the implementation of the OSHA Emergency Temporary Standard (ETS) that would require employers with 100 or more employee to implement a mandatory COVID-19 or weekly testing employees.  Our prior post here set forth what California employers need to know about the OSHA ETS.

The Court’s order stated, “Because the petitions give cause to believe there are grave statutory and constitutional issues with the Mandate, the Mandate is hereby STAYED pending further action by this court.”

OSHA cannot enforce the ETS until this stay is lifted, plus there are numerous other legal challenges to the ETS in other courts.  While this may give employers some additional time to comply with the ETS, how much time, if any at all, is unknown at this point.  In addition, California employers must also closely monitor the steps Cal/OSHA will take in response to the federal OSHA ETS.  Cal/OSHA could modify its ETS to comport with the federal requirements, which California employers would need to comply with.  Employers should consider continuing developing their polices and procedures to comply with the ETS in order to be prepared either way these legal challenges play out on the federal level, with a close watch on any actions taken by Cal/OSHA.

[Update: On November 6, 2021, the United States Court of Appeals for the Fifth Circuit blocked the implementation of the OSHA Emergency Temporary Standard (ETS) that would require employers with 100 or more employee to implement a mandatory COVID-19 or weekly testing employees.  Our update on the court’s ruling is here.]

On November 4, 2021, the Occupational Safety and Health Administration (OSHA) issued the Emergency Temporary Standard (ETS) that implements the Biden Administration’s COVID-19 vaccine mandate for large employers: employers with 100 or more employees.  The OSHA ETS will be published in the Federal Register and becomes effective, November 5, 2021.  Employer obligations begin on December 5, 2021.  Below is a brief overview of the OSHA ETS and what this could mean for California employers.

1. OSHA ETS vaccine mandate.

The OSHA ETS required covered employers (employers with 100 or more employees) to ensure all employees have been vaccinated by January 4, 2022.  Employees who have not received all necessary shots to be vaccinated must be tested on at least a weekly basis.  Should an employee test positive, they will need to be removed from the workplace.  All unvaccinated employees are required to wear face masks in the workplace.

2. Employers are required to pay for time for employees to obtain vaccine.

Starting December 5, 2021, employers are required under the ETS to provide “reasonable time” to each employee during work hours for each of their primary vaccination doses.  OSHA’s FAQs state that a “reasonable time” includes up to four hours of paid time, at the employee’s regular rate of pay, for the purposes of vaccination.  OSHA also explains that employers do not need to pay the employee if they obtain the vaccination outside of work hours.

The four hours of paid time that employers must provide for time off to receive the vaccination cannot be offset by any other leave that the employee has accrued, such as sick leave or vacation leave.

3. Employers are required to pay for time off to recover from vaccine side effects.

If an employee experiences side effects after receiving the vaccination, the employer must pay employees for time off work.  Generally, OSHA presumes employers who provide for up to two days of paid sick leave per primary vaccination dose for side effects, the employer would be in compliance with the requirement to provide a “reasonable cap” on paid time off.  When setting the “reasonable cap,” the employer does not need to account for the possibility of the vaccination resulting in a prolonged illness in the vaccinated employee (e.g., a severe allergic reaction). The reasonable time and paid sick leave that employers are required to pay employees to recover from side effects is in addition to four hours of paid time to receive each primary vaccination dose also required by the standard

For purposes of time off due to side effects of receiving the vaccine, employers can require employee to use accrued paid sick leave.  To the extent employees do not have any accrued paid sick leave, employers cannot require employees to run a negative balance of accrued sick leave for these purposes.  This requirement to pay employees does not apply retroactively for leave taken prior to December 5, 2021.

The OSHA ETS does not require employers to pay for COVID-19 testing.  However, other laws could require employers to pay for this testing – and California employers must approach this issue with caution.

4. Employers must provide employees certain information about COVID-19 vaccinations.

Covered employers must provide each employee, in a language and at a literacy level the employee understands any policies and procedures the employer establishes to implement the ETS. This includes:

    • any employer policies;
    • the process that will be used to determine employee vaccination status, as required;
    • the time and pay/leave they are entitled to for vaccinations and any side effects experienced following vaccinations;
    • the procedures they need to follow to provide notice of a positive COVID-19 test or diagnosis of COVID-19 by a licensed healthcare provider;
    • and the procedures to be used for requesting records.

Employers must provide additional information to unvaccinated employees, including information about the employer’s policies and procedures for COVID-19 testing and face coverings.

In addition, OSHA states that the information provided to employees must address:

  • COVID-19 vaccine efficacy, safety, and the benefits of being vaccinated (by providing the document, “Key Things to Know About COVID-19 Vaccines,” available at https://www.cdc.gov/coronavirus/2019-ncov/vaccines/keythingstoknow.html);
  • the requirements of 29 CFR 1904.35(b)(1)(iv), which prohibits the employer from discharging or in any manner discriminating against an employee for reporting work-related injuries or illness, and Section 11(c) of the OSH Act, which prohibits the employer from discriminating against an employee for exercising rights under, or as a result of actions that are required by, the ETS. Section 11(c) also protects the employee from retaliation for filing an occupational safety or health complaint, reporting a work-related injuries or illness, or otherwise exercising any rights afforded by the OSH Act (fact sheet available in English and Spanish); and
  • the prohibitions of 18 U.S.C. § 1001 and of Section 17(g) of the OSH Act, which provide for criminal penalties associated with knowingly supplying false statements or documentation (fact sheet available in English and Spanish).

5. Does the federal OSHA ETS preempt Cal-OSHA ETS and local county and city vaccine mandates?

OSHA and the White House have been clear that the federal OSHA ETS preempts any state and local laws on the issue.  During a call with reporters on November 3, 2021, a senior administration official stated:

The OSH Act provides that OSHA standards preempt any state occupational safety or health standard “relating to [the same] occupational safety or health issue” as the federal standard OSHA.

This ETS preempts the occupational safety and health issues of vaccination, wearing face coverings, and testing for COVID-19.  Thus, the standard preempts states, and political subdivisions of states, from adopting and enforcing workplace requirements relating to these issues, except under the authority of a federally approved state plan.

However, California employers will need to monitor the response from Cal/OSHA regarding what actions it will take because of the federal OSHA ETS.  The current Cal/OSHA ETS does not require employers of any size to mandate vaccines or require testing for employees who are not vaccinated.  Cal/OSHA could decide to adopt the federal OSHA ETS, or it could adopt a modified version that meets the requirements of the federal OSHA ETS with additional restrictions.  Employers need to monitor Cal/OSHA’s response over the next 30 days.  A collection of articles discussing the Cal/OSHA ETS is available here.   However, employers subject to the federal OSHA ETS should begin steps to comply with these requirements while also ensuring compliance with California’s additional requirements.

Moreover, there is a patchwork of various county and city requirements for vaccine mandates for employers across California.  There is an argument that these local requirements applicable to employers are preempted by the federal OSHA ETS.  However, employers are cautioned to seek legal counsel before deciding not to comply with any requirement from the state of California or a local jurisdiction.

Resources for Employers:

OSHA publish FAQs on the new ETS here.

For some suggestions on developing a mandatory vaccination policy, see our prior post here.

Also, my firm will be conducting a webinar on new laws facing California employers in 2022 on Wednesday, November 17, 2021.  We will be discussing the federal OSHA ETS during the webinar.  Registration for the webinar is here.

Labor Code section 226 requires that employers provide to employees semimonthly or at the time of each payment of wages, either as a detachable part of the check, or separately if wages are paid by personal check or cash, accurate itemized statements in writing.  The Labor Code refers to these documents as “itemized statements”, but they are also referred to as pay stubs, wage statements, and itemized wage statements.  Employers need to ensure compliance with the technical aspects of Labor Code section 226, and should audit this information on a regular basis, and should at least consider these five issues:

1. Ensure compliance with Labor Code section 226(a).

Labor Code section 226(a) requires the following information to be listed on employees’ pay stubs:

  1. Gross wages earned;
  2. Total hours worked (not required for salaried exempt employees);
  3. The number of piece-rate units earned and any applicable piece rate if the employee is paid on a piece rate basis;
  4. All deductions (all deductions made on written orders of the employee may be aggregated and shown as one item);
  5. Net wages earned;
  6. The inclusive dates of the period for which the employee is paid;
  7. The name of the employee and the last four digits of his or her social security number or an employee identification number other than a social security number;
  8. The name and address of the legal entity that is the employer, and if the employer is a farm labor contractor, the name and address of the legal entity that secured the services of the employer; and
  9. All applicable hourly rates in effect during the pay period, and the corresponding number of hours worked at each hourly rate by the employee.

2. Small technical errors can still result in substantial liability.

In Savea v. YRC Inc. (2019), the plaintiff alleged defendant YRC Inc. violated Section 226 because the company listed its fictitious business name (“YRC Freight”) on the wage statement.  Ultimately the Court of Appeals held that “[b]ecause YRC Inc. and YRC Freight are the same ‘legal entity,’ YRC did not violate section 226, subdivision (a)(8) by listing YRC Freight as the employer name on its wage statements.”  The court also rejected plaintiff’s argument that the employer did not provide its “address.”  The employer listed its full address on the pay stub, “10990 Roe Avenue, Overland Park, KS 66211.”  Plaintiff argued that the address should have also listed a mail stop code or ZIP+4, so it should have listed, “10990 Roe Ave. MS A515, Overland Park, KS 66211-1213.” (Italics added.)  The court also rejected this argument, and held that the employer provided its full address on the pay stub and was not required to list the mail stop or ZIP+4 number in the address.

Even though the employer prevailed in Savea, it is a good example of how closely the pay stubs will be examined in litigation, and even a minor technical error could create substantial liability.  In addition, in a different case, Clarke v. First Transit, Inc. (2010), the court held that an employer that only provided a logo with the words “First Transit” on the wage statement violated section 226(a)(8) because it “did not accurately reflect the employer name of First Transit Transportation, LLC, as opposed to First Transit, Inc., a separate and distinct entity.”  Therefore, even though the employer prevailed in Savea, companies must be very careful about listing the correct legal entity on the employee wage statements for compliance with section 226.

3. Potential penalties for violations. 

Labor Code section 226(e) provides that an employee “suffering injury as a result of a knowingly and intentional failure by an employer” can result in damages of $50 for the initial pay period and $100 per employee for each subsequent violation, not to exceed $4,000.  In addition, Labor Code section 226.3 provides that employers who violation Labor Code section 226(a), are subject to a civil penalty of $250 per employee per violation for the initial “citation, and $1,000 per employee for each subsequent violation.

4. Wage statements must be maintained for at least three years.

A copy of employee’s wage statements and records of the deductions must be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.  A “copy” includes a duplicate of the itemized statement provided to an employee or a computer-generated record that accurately shows all of the information required under the Labor Code.

Employers must provide copies of pay stubs to employees upon written or oral request no later than 21 days from the date of the request.  See Labor Code section 226(c).  For more information about responding to records requests by current and former employees, see our prior article here.

5. Don’t rely upon a payroll company to save wage statements.

Employers should not rely upon their payroll company to retain copies of employee wage statements.  First, the obligation falls on the employer do retain these, and many payroll companies do not necessarily save this information.  Second, if the employer changes payroll companies, it may be difficult to access the payroll information from the former payroll company.

Payroll companies are quick to provide employers copies of payroll reports listed the totals paid for all employee for a given time period.  While these reports show the wages and deductions, the payroll reports are not a substitute for a copy of the wage statements.  Employer must ensure that they saved, and have access to the wage statements provided to employees.

In working with employers are various sizes, backgrounds, sophistication, and industries, I’ve seen a lot of confusion and simple misunderstandings about what constitutes employee discipline and how to properly document employee performance issues or discipline.  This Friday’s Five reviews five common misunderstandings about discipline and documentation:

Misconception #1: If there was no formal write-up put in the employee’s file, then the action does not constitute disciplinary action.

There is no legal definition of what constitutes a write-up.  Likewise, there is no legal requirement of what needs to be placed in an employee’s personnel file.  As such, documentation about verbal warnings, e-mails, letters, even notes on napkins can be evidence to support an employer’s position that an employee was terminated because of performance issues.  The key item employers need to remember is if the employee challenges the reason for the termination, the employer needs to be able to offer support for the termination decision, either through testimony and/or documentation.  The documentation can come in any form and does not have to be a formal write-up that is maintained in the employee’s personnel file.  However, this is not to say that employers can do away with formal employee reviews and write-ups, as these are still good practices to maintain and, if done properly, can show trends of how well the employee has performed over extended time periods.

Misconception #2: Verbal warnings do not have to be documented.

If there is no record of a verbal warning, it is very difficult to prove later that the employee had been counseled about the issue.  Managers should always document a verbal warning in some manner, such as in a manager’s log or e-mailing themselves the specifics about the verbal warning.  By preparing an e-mail and sending it to human resources or even if the manager creates an email to herself this creates a great time-stamped record that is excellent evidence should there ever be any litigation concerning a termination.

Misconception #3:  Employees must sign disciplinary documents.

Some employers believe a write-up or documentation is not valid unless the employee signs the write-up, but this is not true.  While it is a good policy to have some system to prove the employee was presented with the write-up, it is not required that the employee sign the document.  It is common that an employee will refuse to sign such documents because they do not agree with it, but this should not prevent the employer from documenting the discipline.  To alleviate this issue, employers can provide a line on the document that states the employee does not agree with the write-up, but is signing the document only to acknowledge receipt.  If the employee still refuses to sign the document, the manager administering the write-up should simply record on the bottom of the document that it was presented to the employee, the date, and that the employee refused to sign.

Another method to avoid the argument that the employee never received the written warning is to email the employee.  This creates a great record of when the warning was prepared and sent to the employee, which will be hard for the employee to argue was never provided to them.

Misconception #4: Employers cannot fire employees on their first offense.

While employers may choose to implement a progressive discipline policy that starts discipline with a verbal warning and progresses to a second or third written warning prior to termination.  However, if using a progressive disciplinary system, employers should be careful to preserve the employee’s at-will status and reserve the right to not follow the progressive disciplinary system.  If the employee is at-will, they can be terminated at any time, even after their first small infraction of a company policy.  For more information about at-will employment, click here for our previous article.

Misconception #5: Disciplinary documentation should be as broad as possible.

While write-ups and performance documentation should address the overall issue that the employee needs to improve, employers need to avoid general statements without providing specific examples.  For example, instead of writing-up an employee for having a “poor attitude,” the employer should provide a specific performance issue, such as the employee’s response to a customer was rude and not professional and set forth what the employee said.

A creative plaintiff’s lawyer can spin broad language as evidence to support their allegation that the reason was based on the employee’s complaint, race, gender or age. A good practice is to use concrete examples in the performance review, such as:

  • You were 25 minutes late today.
  • Your conduct towards your coworker was unacceptable today when you informed Mr. Jones that “it was not your job to help him and he should know how to do these tasks by now.” You are expected to assist others in all aspects of their job, and to the extent they need additional help, you need to provide assistance to ensure that the customer’s needs are met.
  • You did not provide adequate customer service last Tuesday when you ignored the customer’s request for help in retrieving a different size three times.

The employer should also document the time, date and facts of the incident.  Write-ups should also list the conduct that is expected of the employee in the future.  In providing concrete examples of how the employee did not meet expectations, it will be difficult for the employee to dispute the documentation later.

I’ve been working with several clients recently in reviewing various timekeeping and payroll systems and am amazed about the limited capability for some of the software being offered to employers.  With employees’ access to computers, point of sale systems, tablets and other technology, timekeeping should be a seamless function within a company in 2021, but surprisingly software companies often over promise on what they can deliver.  Below are five key functions that timekeeping software need to provide to California employers in 2021:

1. Timekeeping software must maintain records in an “indelible” form.

California Wage Orders require that employers maintain the employees time records “in the English language and in ink or other indelible form.”  “Indelible” means that the time entries cannot be erased, removed, or changed.

The Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on July 20, 1995 stating that “storage of records by electronic means meets the requirements of California law if the records are (1) retrievable in the State of California, and (2) may be printed in an indelible format upon request of either the employee or the Division.”

However, the DLSE issued another Opinion Letter on November 10, 1998 advising employers that the electronic time record data could be maintained outside of the State of California “as long as a hard copy of the records was maintained at a central location within California.”  As these two Opinion Letters contradict each other, employers could also look to the Wage Orders.  The Wage Orders require that time records “shall be kept on file by the employer for at least three years at the place of employment or at a central location within the State of California.”

Therefore, employers should consider maintaining a copy of employee time records, either electronically or on paper, within the State of California.

2. Must record required information – especially information about meal breaks.

California Wage Orders require employers keep “[t]ime records showing when the employee begins and ends each work period. Meal periods, split shift intervals and total daily hours worked shall also be recorded. Meal periods during which operations cease and authorized rest periods need not be recorded.”  IWC Wage Order 5-2001(7)(a)(3).

Additionally, Labor Code section 1174 requires employers to keep time records showing the hours worked daily and the wages paid, number of piece-rate units earned by, and the applicable piece rate paid.

It is essential that timekeeping software record the information required by the Labor Code.

3. Meal break attestations should be recorded electronically.

The California supreme court in Donohue v. AMN Services LLC (2021) explained that if an employer’s records do not show a compliant meal break was taken by the employee, it may be possible for the employer to use electronic attestations at the time an employee does not take a full meal break, a late meal break, or misses a break in order to ensure accurate tracking.

In Donohue, the employer’s timekeeping system provided a drop-down menu that prompted the employee to choose one of three options:

  1. “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose not to”;
  2. “I was provided an opportunity to take a 30 min break before the end of my 5th hour of work but chose to take a shorter/later break”;
  3. “I was not provided an opportunity to take a 30 min break before the end of my 5th hour of work.”

The employee was required to choose an option by the end of the pay period, and if the employee selected item #3, they were paid a premium wage for the missed break. The court recognized that this attestation by the employee would be enough to track meal break violations or to establish that the employee was provided a meal break but voluntarily chose to continue to work.

The use of electronic attestations by employers in California to defend against meal and rest breaks is critical.  Attestations shift the burden of proof back to the plaintiff to establish that they did not have an opportunity to take a meal or rest break, even if the time records show that they did not clock out for a compliant meal break.  The timekeeping software should require employees to complete the attestation before clocking out at the end of their shift.

4. Timekeeping software must record edits to time entries.

Timekeeping software needs to record when an employee’s time entry was changed.  It should record who made the change, when the change was made, why the change was made, and what exactly was changed.  The software should be able to print a report of all of the changes made, and should be sortable by time period, employee, and the manager who made the change.  The software should also be able to generate a report for select employees on a batch basis.  This is necessary in wage and hour litigation when a sampling of employee data is sometimes required to be disclosed to opposing counsel.

Being able to access this information quickly and efficiently is critical to defend against wage claims.  For example, a few years ago we defended a claim where an employee alleged that a manager edited time punches in an electronic timekeeping system to reflect less time.  However, upon review of the time entries, and the edits, the net effect of the manager’s changes resulted in an increase in the time the employee worked because the employee forgot to clock in at the beginning of the shift on a regular basis.

5. Retain back-up copies in a usable format that the employer can access, even if the employer is no longer a client of the software provider.

The statute of limitations for many wage and hour class actions in California is four years under Business and Professions Code section 17200 (this is one year longer than under the Wage Orders mentioned above), and employers should consider keeping wage statements and other wage and hour records for four years.  Just as critically important, this data needs to be saved in a manner that is easily accessible and usable.  Records for thousands of employees maintained on paper printouts held in a storage unit are not easily accessible, and create huge costs when these paper records need to be reviewed and potentially relied upon in litigation.  Digital time records that are stored in a common format, such as a data file that is compatible with Excel, save a huge amount of time and costs when needed in litigation, and can ultimately be an advantage in litigation.

I enjoy working with entrepreneurs; I love their spirit, drive, and persistence, even when the odds are stacked against them.  This is especially true now dealing with the labor shortage, supply chain disruptions, and irate customers.  But what makes entrepreneurs keep working, taking risks, and showing up each day?  Here are five qualities that I believe make a successful entrepreneur/business founder:

1. They don’t do it for the status.

A restaurant client of mine opened a new restaurant a few years ago and invited friends and family to the soft opening.  You would think that this would be a great time for the operator to celebrate his success and meet with the people attending the event, right?  He was one of the first people I saw walking up to the restaurant because he was in the parking lot picking up trash.  I’ve changed this story a bit to protect the identity of my client – but the essence is true – this successful entrepreneur was picking up garbage to ensure customers had a great first experience.

If an entrepreneur is doing it for the status, they will not do the dirty work, put in the long hours, or have the push that is required to have a chance at success.  Entrepreneurs understand they must do everything in their company – even pick up trash during the launch.

2. They can rely upon and follow their own instinct.

There are many different stats on the failure rate of startups – but the often cited percentage is that 90% fail.  Also, only 25% of small businesses will employ more than just the founder.  Entrepreneurs are confident in their own decisions and have the fortitude to be held accountable for their decisions.  It is a difficult lifestyle (often not discussed, but getting more attention recently) that can be very lonely.  In the likely event that the startup fails, the entrepreneur must be comfortable with their contacts, friends and family members who will likely criticize the entrepreneur’s attempt as being foolish.  But if the company succeeds, these same critics will be the first ones who would say that they always knew the entrepreneur “had it in them.”  Entrepreneurs don’t internalize the shame or the accolades, and they continue on following their own instincts.

3. They select great teams and develop a great culture.

Entrepreneurs have a great EQ and cultivate the people around them and on their team.  At first, when the company cannot afford other employees and executives, it is critical that they have friends and family that they can trust to receive honest feedback.  As the company grows, these positions are filled with other executives selected by the entrepreneur.  As Gary Vaynerchuk points out, “The higher you climb and the more the business grows, the stakes become a lot bigger. More and more people are depending on you to make the right decisions for them and the company. The league you’re playing in and the skill set required jumps from pickup ball to NBA very quickly.”  It is critical that the entrepreneur selects the right team, and communicates the culture of the organization.  This stars with just two employees.

4. They are comfortable with uncertainty.

One trait that I believe is essential for an entrepreneur is the ability to be comfortable with uncertainty.  It may even extend beyond uncertainty, to include the ability to be comfortable with risk.  A lot of people who claim they are a start-up founder say they like the risk, but let’s face it, once there is a major setback or the company fails, most people go and get a job.

5. They are realistic, but don’t let the status quo set their reality.

Yes, there are many obstacles facing the entrepreneur, and yes, no one has done this before, but the entrepreneur sees potential opportunities where others have not.  This takes a very refined skill of understanding reality, while also being opportunistic, just enough to see something that others have not seen before.  For Bill Gates and Paul Allen, this was the insight that PCs would become a fixture in every business and house, when the companies that dominated the field, such as IBM, were certain that mainframe computers were the future.  For Jeff Bezos, it was the insight that he could take an on-line book company and evolve it to sell everything to everyone.

Are these qualities in a person’s DNA or are they learned over time?  I believe it is a bit of both – some natural tendencies in combination with hard work that can ultimately lead to a successful business.