California employers often ask what steps they can take to prevent employment litigation. While it’s impossible to completely avoid frivolous lawsuits, employers can focus on what they can control. By regularly reviewing a few key areas, employers can significantly reduce their liability. Here are five steps to get started (hint: the most important step is listed last):

1. Take Reasonable Steps to Comply with the Labor Code to Reduce PAGA Audits

    With the new Private Attorneys General Act (PAGA) reform law, California employers can receive immediate relief. The reformed PAGA framework caps penalties for employers who take reasonable steps to comply with the Labor Code, potentially reducing penalties by as much as 85%. To establish compliance, employers should conduct periodic wage and hour audits to ensure adherence to meal and rest break obligations, establish compliant policies and handbook policies, train supervisors on Labor Code compliance, and take appropriate corrective action with supervisors to violate company policy.  Also, quarterly audits by experienced employment law counsel can demonstrate good faith compliance with the Labor Code.

    Also, next Thursday, January 30, 2025, my firm is offering a webinar: Navigating the Revised PAGA Law-Steps Employers Must Take to Reduce Penalties.  We will be offering certificates to all who attend the entire presentation, and this is a start to establish that your organization is taking reasonable steps to understand and comply with California employment laws. Register here.

    2. Document Reasons For Terminations Accurately

    When terminating an employee, consider providing them with a termination letter that clearly documents the reason for the termination. While this is not legally required, it is a good practice. It is crucial to document performance issues accurately and not to sugarcoat the reasons for termination. If the termination is for cause, clearly state this in the documentation. Avoid taking the easy route by labeling the termination as a layoff if it is not. The company does not want to be in a position where it initially provides a reason as a layoff, but then, when litigation is initiated, attempts to explain that the true reason was performance. This can appear as if the company is changing the reason for the termination, which can negatively impact the company’s credibility in litigation. What the employer states as the reasons for the termination, both in the documents and at the termination meeting, will be key. Therefore, do not downplay the reasons and ensure that the stated reasons are complete and accurate.

    Examples of “for cause” reasons for termination could include:

    • Consistent poor performance or failure to meet job expectations
    • Violation of company policies or procedures
    • Insubordination or refusal to follow reasonable instructions
    • Theft or dishonesty
    • Harassment or discrimination
    • Excessive absenteeism or tardiness
    • Misuse of company property or resources

    By clearly documenting these reasons, employers can provide a solid foundation for their decision and reduce the risk of litigation.

    3. Consult with an Employment Attorney Regularly

    Having an employment attorney well-versed in California employment law is essential. California’s employment laws are complex, and an experienced attorney can save the company in legal fees and potential exposure. Just as you wouldn’t go to a general practitioner for an eye problem, you need specialized advice for California employment issues. Regular consultations with an employment lawyer also allow you to assess their compatibility with your operations, which is better discovered early on rather than during a class action lawsuit.

    4. Hire a Knowledgeable HR Professional

    An experienced HR professional allows executives to focus on their core roles and provides employees with a clear point of contact for HR information or complaints. A human resource professional experienced in handling workplace investigations and employee complaints is invaluable. No matter how well you run your company, there will be complaints. Having a proactive, knowledgeable professional to investigate and resolve issues is crucial to a successful company.

    5. Ensure the Owner/CEO is Present, Involved, and Open to Hearing Complaints

    The most important step towards reducing employment litigation comes from the top. The amount of litigation is inversely proportional to how involved the owner or CEO is with the employees. Large employers in California with a clean litigation record often have owners who are present daily, know employees by name, and are available to hear and resolve complaints. If employees have a process to make complaints and feel the company treats them seriously, most issues can be resolved internally. When employees feel unheard or unfairly treated, they may turn to litigation to resolve disputes.