Cheesecake Factory restaurants in Southern California were cited for $4.57 million for wage and hour violations and penalties by the Labor Commissioner earlier this week.  What may come as a surprise to many is that the citation was based on alleged wage violations for employees of contractors hired by Cheesecake Factory, not its own employees.  The investigation focused on the janitorial subcontractors who performed work at the restaurants.  The Labor Commissioner found that the janitorial employees were not paid for all minimum wage, overtime, not provided meal and rest breaks, and not paid for split shifts.

The subcontractor janitorial company was Americlean Janitorial Services Corp., a Minneapolis company doing business as Allied National Services, Inc. The workers were managed by a San Diego-based company, Magic Touch Commercial Cleaning.  The Labor Commissioner alleged that the workers had to work additional hours when asked to complete tasks or wait for approval of their work by the Cheesecake Factory managers.  This Friday’s Five focuses on key takeaways for California employers from the Labor Commissioner investigation and citation:

1. Cheesecake Factory is being held jointly liable for the subcontractor’s wage violations under Labor Code section 2810.3.

Effective January 1, 2015, Labor Code section 2810.3 expanded the liability of “client employers” that obtain workers through temporary agencies or other labor contractors.  The law requires that the client employer who obtains the workers through the agency must share in the liability for any wage and workers compensation issues.  The law also provides that a client employer cannot shift all of the liability for wage and workers’ compensation violations.  However, the law does provide that the client employer can seek indemnity from the labor contractor for violations.  Therefore, it is important for employers who are covered by Labor Code section 2810.3 and who obtain workers through a labor contractor to ensure the labor contractor is meeting all wage and workers compensation requirements.  The hiring company should also consider negotiating an indemnity provision in the contact with the labor contractor to protect itself should any liability arise.

2. Companies contracting for services need to ensure the subcontractors follow all applicable wage and hour laws and pay the employees properly.

With the joint liability created by Labor Code section 2810.3, companies contracting for labor at their establishments need to take steps to ensure that the contractors are following wage and hour laws.  This may entail reviewing the contractor’s pay practices, and negotiating a contract with the company providing that the contractor indemnifies the hiring company for any wage and hour violations.  The hiring company should also ensure that there are some assets or potential insurance that would be available should indemnity be required.

3. Review split shift policies to ensure compliance.

The Labor Commissioner found that the janitorial employees worked split shifts without being paid the split shift pay.  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.  Additional information about split shifts can be read here.

4. Review meal break policies to ensure compliance.

The California Supreme Court made clear in Brinker Restaurant Group v. Superior Court that employers need to provide 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 following chart illustrates the timing requirements for meal breaks:

Meal breaks must be recorded.  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. In Brinker, the Supreme Court explained that:

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.

Employers should also establish a complaint procedure and provide 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 to be able to establish it has a complaint procedure in place to address missed breaks.  The employee is entitled to receive up to two hours of premium pay per day – one hour for missed meal breaks and one hour for missed rest breaks.  If the employee missed two meal breaks in one day, they would only be entitled to one hour of premium pay.  The same applies to rest breaks.  See UPS v. Superior Court.

5. Review rest break policies to ensure compliance.

In terms of rest breaks, the California Supreme Court held in Brinker 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 following chart sets forth the number of rest breaks employees are entitled to based on the number of hours worked:

The Wage Orders generally require that employers must provide a 10-minute rest period per every four hours worked and the break should, whenever practicable, fall in the middle of the work period. (See Wage Order 4, subd. 12(A).  The rest period must also be paid, and the law does not require that employers record when the employee takes the rest period (unlike an employer’s obligation to record when 30-minute meal breaks are taken).  The California Supreme Court made it clear in Augustus v. ABM Security Services, Inc. that employers must relieve employees of all work-related duties and they must be free from control of the employer during the rest breaks.  For more information about rest breaks, see my prior post here.

This Friday’s Five provides a few reminders about documenting employee performance. While good documentation is hard to gather at the time, it is critical in communicating clear objections to employees for better performance. Also, should a dispute arise that results in litigation, how well the employee’s performance was documented can be the different in winning or losing the litigation. You’ve probably heard these before, but these five reminders are a must for documenting employee performance:

1. Get employee feedback during counseling.

Employees are more likely to ultimately accept critical performance reviews if their feedback is heard. This does not mean that the employer must agree with the employee’s feedback, but just that the employer is considering their feedback in the decision-making process and the employee is not being pre-judged. A good example on how obtaining the employee’s feedback avoided a potentially embarrassing situation and harming a relationship with the employee was noted in an article by SHRM (“How to Create Bulletproof Documentation”). The article recalled a situation when a manager wanted to discipline an employee for being late to her new position in the company. But prior to issuing the discipline, the HR manager asked the manager to seek clarification from the employee about why she was late. The manager followed the advice, and it turned out that the employee’s tardiness was a result of employee providing training to the replacement at her prior position in the company.

2. Set clear consequences.

Employers need to be clear in their documentation of performance with employees. Set out clear benefits and consequences for the employee’s success or failure going forward. The documentation should not forget to document the positives if the employee improves. Likewise, while sometimes difficult to confront employees with the consequences for their failure to improve, it is critical to be clear. The documentation should be clear, such as: “Failure to improve performance as set forth in this review may result in further disciplinary actions, up to and including termination.”

3. Avoid vague language like “bad attitude” or “failure to get along with other employees.”

One of the hardest issues as a litigator is defending a wrongful termination claim when the documentation provided to the employee contains vague criticisms of the employee’s performance. Managers should avoid at all costs performance reviews that the employee has a “bad attitude.” If litigation ensues, and the company is forced to defend its decision to terminate the employee, and vague statements like this do not clearly establish the reasons for the termination. Instead a creative plaintiff’s lawyer can spin this 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.

4. Employees do not need to sign written performance warnings.

While it is a good practice to have employees sign performance reviews to avoid any disputes that they were never shown the performance review, it is no legal requirement to have the employee sign the document. Employees often object to signing documents criticizing their performance. There are two potential responses to this objection: 1) have the employee’s acknowledgment clearly state that the employee’s signature is only acknowledging receipt of the document, not agreeing with the content, or 2) if the employee simply refuses to sign, have the manager or a witness sign and date the document with a notation that the document was provided to the employee and he or she refused to sign.

Also, another misconception: there is no legal requirement that employees must be given three warnings prior to being terminated (as long as the company has maintained the employee’s at-will status).

5. Remember that write-ups and documentation do not have to be on any “official” forms.

Managers sometimes feel that they must wait until they can officially document an employee’s performance on the company’s official form. However, managers need to be trained on how to document performance and it must be made clear to them that while the company’s forms are preferred, documentation can be done on many formats, such as: e-mail to oneself or to HR, the manager’s log, any paper available, or even electronically on any other company device. I personally like when managers send emails to themselves documenting conversations with employees. Given the data associated with e-mails, such as time and date created, e-mails are excellent documentation of a manager’s conversation with an employee about performance issues. Managers should also be reminded that they need to document verbal warnings in some manner – if the verbals are not documented, it is as if they never occurred.

Clients come to my firm often frustrated by California employment laws and their complexity, the raising costs of doing business in California (such as the higher minimum wage), and the legal system in general.  I have to agree that California poses one of the most difficult business environments businesses have to operate within, but I come back to thinking that many of the issues the clients voice frustration with can be managed if they are given the tools to do so.  This Friday’s Five lists five things every employment attorney should tell their California clients:

1. Litigation is expensive (and no, I’m not just talking about legal fees).

Two lessons here:  1) Don’t approach litigation with the attitude that you are fighting for principle (unless you have unlimited resources), and 2) focusing on human resources/policy development/legal compliance before litigation (see #5 below) can help prevent litigation and save resources.  For most businesses, litigation should be avoided, but to the extent it cannot be avoided, companies should usually view the transaction not as a personal vendetta, but as a business transaction.  Executives should weigh the costs of litigation versus the benefits just as they do in any other business decisions to determine whether to litigate the case or make an attempt at settlement.  But don’t approach this decision based on any attorney’s advice that litigation can be completed fast and inexpensively.  As there are defense costs, but as just or possibly costlier is the time and effort that the company and its managers and employees will have to spend defending the litigation instead of running the business.  This is often a hidden cost that must be taken into consideration.

2. Treating people with respect will likely result in less litigation.

I understand, it seems like California employment law is always adding new requirements on employers that are difficult to comply with.  However, with a small amount of time and attention, most of the issues that present the largest amounts of potential liability for employers can easily be managed.  But for the few occasions when it is legally unclear about what action the company should take, or if legal counsel cannot be reached in time for a decision where the law is not clear, employers that treat the employee with respect will usually avoid litigation.  I believe that, for the most part, employees understand that employers/managers/supervisors must make difficult decisions.  When the employee is treated with respect during a difficult employment decision, even though they might not like the decision, they will probably understand why it was made, and most likely will not hold a grudge against the company.

3. When in doubt, document.

As a litigator, the worse feeling I have is when the employer provides me with an employee personnel file for a problem employee, but the personnel file contains less than a few pages.  Employers’ primary defenses to many employment lawsuits will be won or lost on the documentation created and maintained by the employer.  The employee that believes they were wrongfully terminated will face a much tougher case if there were a dozen documented performance write-ups in their file setting for the date and examples of what the employee did or failed to do.  For additional information, see my prior post, Five best document storage and retention practices for California employers.

4. Train front line managers and supervisors.

A company’s managers and supervisors are the eyes and ears of the company.  They must be well trained about what issues can create legal liability for the company, as well as be trained in new developments in the law (for example, so they are not asking about criminal histories during the interview process since the beginning of 2018) and are trained about how to be managers (and treat people with respect).  This training for managers/supervisors is the difference between a good and a great company.

5. A small investment in human resources will provide a return.

As I wrote about last week, human resource departments need to have a more critical role in organizations and should be viewed on the same level as marketing and finance departments.  Giving HR managers budgets to proactively update policies, handbooks, and training sessions for managers will provide a positive return to the company.  Now it may not be an immediate net gain on the financials, but if one lawsuit is avoided because of the proactive measures put into place, this will be money well spent (see item #1).

In a huge development in the last couple of weeks, a change in federal law now permits California employers to include back of the house employees in tip pools.  This week’s post is an update and a general discussion about issues facing restaurants, hotels, and other industries where tipping and gratuities are left for employees.  This simple concept is surprisingly complex for employers.  Here are five issues employers should understand about tips in California.

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.  Employers need to be careful to exclude any employees who direct the work of other employees from tip pools, as lead shift supervisors, floor managers, and others who do not have the authority to hire or fire may still be considered a supervisor for tip pooling purposes.

There must be a reasonable relationship between tip pooling arrangements.  The following examples of mandatory tip pooling percentages have been approved by a court, the DLSE or DOL:

  • A policy in which 80 percent of tips were allocated to waiters, 15 percent to busboys and five percent to bartenders
  • A policy in which cocktail service must give one percent of tips to bartender
  • The Department of Labor responsible for enforcing Federal law has stated that a policy that requires servers to share 15 percent of their tips with other employees is presumptively reasonable
  • A policy in which a server contributes 15 percent to a tip pool, and other employees in the chain of service receive a portion of these tips based on the amount of hours they worked

The following examples were tip pooling policies disapproved by courts or the DLSE and therefore employers cannot legally establish them:

  • A policy providing 90 percent of tips to hostesses who spend only a small amount of time seating customers
  • A policy requiring food server to share 10 percent of tips with floor managers

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) Can California employers have back of the house employees share in a tip pool?

On March 23, 2018, the Consolidated Appropriations Act, 2018 signed by President Trump changed federal law on this issue and allows employers to share tips with back of the house employees.  Therefore, as of March 24, 2018, California employers may include back of the house employees in any tip pooling arrangements.  Prior to President Trump’s approval on the new law, this was not the case, as a Court in Oregon Restaurant and Lodging Association v. Perez, the Ninth Circuit Court of Appeals, which covers California, held in February 2016 that the Department of Labor’s regulations about who can participate in tip pools applies to states like California which do not permit tip credits.  The DOL had issued regulations that under the FLSA a tip pool is only valid if it includes employees who “customarily and regularly” receive tips, such as waiters, waitresses, bellhops, counter personnel who service customers, bussers and service bartenders.  According to the DOL past rule, a valid tip pool “may not include employees who do not customarily and regularly receive[] tips, such as dishwashers, cooks, chefs, and janitors.”  The Plaintiffs in Oregon Restaurant filed a petition for review to the United State Supreme Court.  Given the new law that took effect, the Supreme Court’s review of the case is not necessary.

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, 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.

A service charge added to a customer’s bill is not a tip or gratuity and remains the property of the employer.  Therefore, the employer may distribute the service charge to its employees, including back of the house employees as it wishes.  However, if a service charge is distributed to employees, it is considered wages and effects the employee’s regular rate of pay for overtime purposes as discussed below.

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.

However, if an employer implements mandatory service charges and shares these service charges with employees, the service charges must be considered wages for overtime and tax purposes.  Therefore, the employee’s regular rate of pay for overtime purposes will be higher when mandatory service charges are distributed to the employees.  To calculate an employee’s regular rate of pay, the employer must divide all compensation for the week by the total number of hours worked by the employee.

**Additional issue: Pay attention to other requirements under local ordinances regulating service charges.

For example, Santa Monica’s minimum wage ordinance requires employers to “distribute all Service Charges in their entirety to the Employee(s) who performed services for the customers from whom the Service Charges are collected.”  Santa Monica Municipal Code § 4.62.040.  “Service Charge” is defined as “any separately-designated amount charged and collected by an Employer from customers, that is for service by Employees, or is described in such a way that customers might reasonably believe that the amount is for those services or is otherwise to be paid or payable directly to Employees…under the term ‘service charge,’ ‘table charge,’ porterage charge,’ ‘automatic gratuity charge,’ ‘healthcare surcharge,’ ‘benefits surcharge,’ or similar language.”  Santa Monica Municipal Code § 4.62.010(g).

If an employee is injured and is unable to work overtime (i.e., over 8 hours in a day or 40 hours in a week), can an employer terminate the employee?  Potentially.  Employers may terminate employees who are unable to work overtime if this is an essential duty of the position.  This Friday’s Five reviews when being able to work overtime can be an essential duty of a position:

1. Disability discrimination under California and Federal law

The California Fair Employment and Housing Act (“FEHA”) makes it an “unlawful employment practice” “[f]or an employer, because of … physical disability … of any person … to discharge the person from … employment.” (Gov. Code § 12940, subd. (a)).

Similarly, the Federal ADA prohibits employers from discriminating against any “qualified individual on the basis of disability.” 42 U.S.C. § 12112.  In evaluating discrimination claims under both the ADA and FEHA, courts apply the McDonnell Douglas three-part burden-shifting framework. Raytheon Co. v. Hernandez, 540 U.S. 44, 49 (2003) (citing McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973)); Guz v. Bechtel Nat’l, Inc., 8 P.3d 1089, 1113 (Cal.2000). Under the McDonnell Douglas test, the plaintiff must first establish a prima facie case of disability discrimination.  If established, then the burden shifts to the employer to demonstrate a “legitimate, nondiscriminatory reason” for the challenged action.  Finally, the burden shifts back to the plaintiff to prove that the employer’s asserted reason is pretextual.

2. Unable to perform “essential duties” with a reasonable accommodation

There are certain exceptions to an employer’s liability for disability discrimination. For example, an employer may discharge an employee with a physical disability or medical condition where the employee, because of that physical disability or medical condition, “is unable to perform his or her essential duties even with reasonable accommodations, or cannot perform those duties in a manner that would not endanger his or her health or safety or the health or safety of others even with reasonable accommodations.” (Gov. Code § 12940, subds. (a)(1), (a)(2).)

So the question often turns then on what is an essential duty?  The identification of essential job functions is a “ ‘highly fact-specific inquiry.’ ” (Lui v. City and County of San Francisco (2012) 211 Cal.App.4th 962, 971.)

Evidence of whether a particular job duty is essential includes the following:

  1. The employer’s judgment as to which functions are essential;
  2. Written job descriptions prepared before advertising or interviewing applicants for the job;
  3. The amount of time spent on the job performing the function;
  4. The consequences of not requiring the incumbent to perform the function;
  5. The terms of a collective bargaining agreement;
  6. The work experience of past incumbents in the job; and/or
  7. The current work experience of incumbents in similar jobs.

29 C.F.R. § 1630.2(n)(3); see also Cal. Gov’t Code 12926(f)(2).  In making this determination, a jury will likely look at the job advertisement and the job description for the position at issue.  The jury would also likely review past job performance to see if the employee or others in similar job position routinely were required to work overtime.  In addition, if the employee works in the position and as an accommodation initially the employer attempts to accommodate the work restriction of no overtime, did the employee perform well?  Were there any complaints from customers?  Was all work completed?

3. Overtime can be an essential function of a job

Many courts have held that an employer’s requirement that the employee must be able to work overtime can be an essential function of a job.  Therefore, if the employee is unable to work overtime, the employee cannot assert a disability discrimination claim.  For example, in Rincon v. Am. Fed’n of State, Cnty, & Mun. Employees (N.D. Cal. Aug. 13, 2013) 2013 WL 4389460 the court granted summary judgment where the plaintiff was unable to work extended hours, which was an essential function of her union organizer job.  Also, in Davis v. Florida Power & Light Co. (11th Cir. 2000) 205 F.3d 1301, 1305–1306 the court found that where mandatory overtime work was an essential function of plaintiff employee’s position, summary judgment was properly granted for the employer, an electrical company, on the employee’s disability discrimination claim (“overtime is the tool that gets that work done”).   In Tjernagel v. Gates Corp. (8th Cir. 2008) 533 F.3d 666, 673, summary judgment was properly granted in favor of the employer where plaintiff was unable to perform essential function of overtime, which was an explicit requirement according to job description.

4. Employers must engage in the interactive process

In determining whether an employee’s disability can or cannot be accommodated, the employer is required to engage the employee in the good faith interactive process.  The Department of Fair Employment and Housing sets forth that this includes the following:

  • Employers must evaluate job applicants regardless of their actual or perceived disabilities. They can’t ask about the nature or severity of disabilities nor can they require an applicant to take medical or psychological exams that aren’t routinely given to other prospective hires.
  • Employers may ask an applicant about his/her ability to perform job-related functions and respond to a request for a reasonable accommodation.
  • Employers may (but do not have to) ask for medical certification of an employee’s or applicant’s need for reasonable accommodation.
  • If there is a question of what accommodation is possible or whether it will allow an employee or applicant to do the job, employers are required to engage in a timely, good faith interactive process with the person who needs support to do a job or his or her representative. This process can clarify what job functions are essential, what accommodations are possible, and whether accommodating an employee with disability will be an “undue hardship” to the business operation.

5. Job descriptions are essential

The analysis above should make it clear to employers that written and accurate job descriptions are essential.  Job descriptions should be carefully drafted and updated on a regular basis so that they can be utilized in establishing the essential duties of a job in disability litigation.

Employee terminations and resignations must be planned for in advance to avoid common pitfalls for California employers.  I’ve recently written about go-to hiring practices for employers, so I thought it would be appropriate to follow that post up with this list of go-to termination practices.  This Friday’s Five focuses on critical management and legal considerations for employers during the separation process:

1. Documentation of the reason for termination

What is the reason for termination? Is there a company policy that was violated? [Note: Is the company policy in writing?  Has it been distributed to the employee?  Is there a signed acknowledgement of the policy in the employee’s file?]  Who was involved in termination decision? Review documentation for termination if “for cause” and ensure this documentation is maintained in personnel file.

2. Final pay and accounting

Employers need to prepare the employee’s final paycheck and ensure that any unused accrued vacation time is also included.

Final wages must be paid within certain time limits, including the following:

  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.

Employers should also review if commissions, bonuses, or expense reimbursement owed to employee?  Obtain all expense reimbursement forms form employee.

Employers with multiple locations need to ensure that the final wages are made available.  The place of the final wage payment for employees who are terminated (or laid off) is the place of termination. The place of final wage payment for employees who quit without giving 72 hours prior notice and who do not request that their final wages be mailed to them at a designated address, is at the office of the employer within the county in which the work was performed. Labor Code Section 208.

 3. Company property and passwords

Obtain all company property from employee and reset passwords.  Also, has employee returned all company provided uniforms?  Have all company keys been returned?  The company should also develop a list of all passwords employee had access to and ensure the passwords are reset.

4. Final notices

Employers need to ensure that all required notices are provided to the employee.  For example, common notices include:

  • Notice to Employee as to Change in Relationship (download here)
  • For your Benefit (Form 2320) (download here)
  • COBRA and Cal-COBRA Notices from insurance provider
  • Notify insurance provider
  • Health Insurance Premium (HIPP) Notice (download here)

5. Retention of employee files

Employers need to take measures to secure and save employee’s file, wage, and time records.  For more information, see my prior post, Five best document storage and retention practices for California employers.

Makeup time is one of the rare occurrences under California law that employees have flexibility to adjust their work schedule to accommodate for important life events that come up from time to time. 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.  This Friday’s Five covers five issues 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.

Happy Friday!

My firm is hosting a seminar for business owners, in-house counsel, human resource professionals, and managers to learn about and how to implement best practices at the start of 2018.  Plus, get to see the newly renovated Proud Bird and enjoy some light food and drinks during the mixer.

Our attorneys will be speaking about:

  • New case law developments facing California employers in 2018
  • Minimum wage increases on state local levels in Southern California and how to plan for the year
  • New hiring prohibitions – employers cannot ask about prior salary and new restrictions on conducting background checks, so what can employers still ask?
  • New immigration requirements facing employers under California’s Immigrant Worker Protection Act
  • New case law developments on the enforceability of arbitration agreements

Space is limited, so register early to reserve your spot.

Thursday, February 15, 2018 4:00 PM – 5:00 PM (presentation); 5:00 PM – 6:00 PM (mixer)

The Proud Bird
11022 Aviation Blvd.
Los Angeles, CA 90045

Seminar Program: 4:00 – 5:00 pm
Mixer: 5:00 – 6:00 pm

Cost: Free for firm clients/friends of the firm (if you are a subscriber to the blog, the fee will be waived)
No charge for parking.

To register, visit: www.zallerlaw.com/seminar

Plaintiff Ketryn Cornell began working part-time for the Berkeley Tennis Club as a lifeguard and pool manager in 1997, while attending college at UC Berkeley. She was employed as a night manager and continued to work at the Club after graduating from college in 2001.  In 2011, she took on additional duties and began working as a night manager, day manager, and tennis court washer. She received positive reviews, merit bonuses, and raises throughout this period.

The Club employed a new general manager in 2012.  The new manager implemented a uniform policy.  While mandating the staff to wear uniform shirts, the largest sized ordered by the club did not fit Cornell.  Cornell was obese, at five feet, five inches tall, she weighed over 350 pounds.  Cornell explained to the general manager that she needed a bigger size, and he reported that he would work on providing an appropriate uniform.  However, it is unclear if he attempted to find shirt Cornell could fit.  Taking upon herself, Cornell ordered shirts from a specialty shop at her own expense and had them embroidered with the Club logo.

Cornell filed a lawsuit in May 2014, asserting causes of action for various Labor Code violations and the eight causes of action that were at issue on the appeal, which included disability discrimination/failure to accommodate under the Fair Employment and Housing Act (FEHA), wrongful discharge in violation of public policy based on the disability discrimination, disability harassment under the FEHA, and retaliation under the FEHA.  This Friday’s Five reviews five takeaways for California employers arising from this disability discrimination decision:

1. Obesity can qualify as a physical disability under the Fair Employment and Housing Act.

Under FEHA, it is unlawful to discriminate against an employee on the basis of “physical disability.” (Gov. Code, § 12940, subd. (a).)  In addition to making it illegal to discriminate on the basis of disability, the FEHA makes it unlawful “to fail to make reasonable accommodation for the known physical . . . disability of an . . . employee.” (§ 12940, subd. (m)(1).)  Finally, the FEHA prohibits an employer from harassing an employee “because of . . . physical disability.” (§ 12940, subd. (j)(1).)

The Club moved for summary adjudication of the discrimination/failure to accommodate claim and the harassment claim on the basis that Cornell’s obesity is not a physical disability under FEHA. The Club also argued that even if Cornell has a condition protected by the FEHA, she did not require an accommodation and was not terminated for a discriminatory reason, and the Club’s actions were not severe or pervasive enough to constitute harassment.

Cornell argued that her obesity qualified as an actual physical disability because it is a “physiological disease, disorder, condition, cosmetic disfigurement, or anatomical loss that does both of the following: [¶] (A) Affects one or more of the following body systems: neurological, immunological, musculoskeletal, special sense organs, respiratory, including speech organs, cardiovascular, reproductive, digestive, genitourinary, hemic and lymphatic, skin, and endocrine. [¶] (B) Limits a major life activity.” (Government Code § 12926, subd. (m)(1).)

In Cassista v. Community Foods, Inc. (1993) 5 Cal.4th 1050 (Cassista), the California Supreme Court held “that weight may qualify as a protected `handicap’ or `disability’ within the meaning of the FEHA if medical evidence demonstrates that it results from a physiological condition affecting one or more of the basic bodily systems and limits a major life activity.” (Id. at p. 1052.) Interpreting the same statutory language as currently found in section 12926, subdivision (m)(1)(A), and relying on federal antidiscrimination law for guidance, the Court concluded that “an individual who asserts a violation of the FEHA on the basis of his or her weight must adduce evidence of a physiological, systemic basis for the condition.” (Cassista, at pp. 1063-1065.)

The court set forth the definition of “physiological”:

Rather, the pertinent question is whether a genetic cause qualifies as a “physiological cause.” “Physiological” means “relating to the functioning of living organisms.” (Oxford English Dict. Online (3d ed. Mar. 2006) [as of Dec. 21, 2017 [physiological].) This term encompasses genetics, and the Club does not argue otherwise. We therefore reject the implication that Cornell cannot establish her claim by proving that her obesity has a genetic cause.

The Court found that Cornell’s testimony that other doctors hand determined that her obesity was caused by genetics, and the fact that those doctors were not deposed, was enough evidence for Cornell to overcome the employer’s motion for summary judgment and proceed to trial on this claim.

2. Even if others were involved in decision to terminate, plaintiff can still maintain a discrimination cause of action if person alleged to have discriminated against plaintiff was involved in the termination decision.

The employer in this case argued that the general manager who was alleged to have discriminated against Cornell was not the only person involved in the decision to terminate her, but that other supervisors were involved, and therefore the decision could not have been discriminatory.  The court rejected this argument in holding:

“[S]howing that a significant participant in an employment decision exhibited discriminatory animus is enough to raise an inference that the employment decision itself was discriminatory, even absent evidence that others in the process harbored such animus.” (DeJung v. Superior Court (2008) 169 Cal.App.4th 533, 551.) There is evidence that [General Manager] Headley made several comments suggesting he held a discriminatory animus toward Cornell. Although the extent to which he participated with Gurganus and Miller in the decision to fire Cornell is unclear, there is plenty of evidence that he participated in some way….

3. While sporadic comments are not enough to create a hostile work environment, courts may look to the context of all of the actions taken against the employee in determining if a hostile work environment existed.

The Club argued that even if Cornell is otherwise entitled to protection under the FEHA, summary adjudication of her disability harassment claim was proper because she was not subject to sufficiently severe or pervasive harassment. The appellate court disagreed:

Here, Cornell was able to present enough evidence to at least continue to trial with her harassment cause of action because of the statements made by the General Manager in regards to obtaining a uniform shirt that fit Cornell, the General Manager’s comments about Cornell having weight-loss surgery, and his comments to kitchen staff not to give Cornell extra food because “she doesn’t need it.”  The Court recognized that these types of comments on four occasions do not create a hostile work environment, “Four comments over several months does not establish a pattern of routine harassment creating a hostile work environment, particularly given that the comments were not extreme.”  (“Actionable harassment consists of more than “annoying or `merely offensive’ comments in the workplace,” and it cannot be “occasional, isolated, sporadic, or trivial; rather, the employee must show a concerted pattern of harassment of a repeated, routine, or a generalized nature.” (Lyle v. Warner Brothers Television Productions (2006) 38 Cal.4th 264, 283.)”)

However, the Court found that the employer’s conduct must be viewed in context of the General Manager’s other actions, “including his ordering of shirts that were significantly too small for her and reporting to the Personnel Committee that she was resisting the uniform policy by not wearing appropriate shirts, as well paying her less than another employee and denying her extra hours and internal job openings.”  This evidence was enough to prevent the employer from dismissing Cornell’s harassment claims prior to trial.

4. Requests for reasonable accommodations are protected activities under the law.

In 2015 the Legislature amended section 12940 to add subdivision (m)(2), which now makes it unlawful for an employer to “retaliate or otherwise discriminate against a person for requesting accommodation under this subdivision, regardless of whether the request was granted.” (Stats. 2015, ch. 122, § 2.)

5. Primary takeaway for employers: treat all employees with respect.

While certain conduct that is rude, unfair, and unethical may not raise to the level of being unlawful discrimination, harassment or retaliation under the law, this type of conduct will inevitably lead to higher litigation costs and employee turnover.  I’ve written about how most companies cannot afford to have managers like Steve Jobs, and this case is another example.  While the employer had arguments that the manager’s actions in this case were not illegal under the law, even if the employer prevails at trial in this case, the costs associated with the litigation are substantial.  Unprofessional comments by co-workers, managers and supervisors in the workplace should be stopped by employers, as while sometimes they may not be illegal, it drives litigation from employees who felt that they were not treated fairly.

The appellate court’s decision, Cornell v. Berkeley Tennis Club, can be found here.

Effective January 1, 2018 California employers can no longer ask an applicant for employment to disclose information about criminal convictions.  The new law (added as Section 12952 to the Government Code) applies to employers with 5 or more employees.  Once an offer of employment has been made, employers can conduct criminal history background checks, but only when the conviction history has a “direct and adverse relationship with the specific duties of the job,” and requires certain disclosures to the applicant if employment is denied based on the background check.  This Friday’s Five covers five areas of the new law that California employers should be aware of when hiring employees:

1. Employers may not include on any application for employment “any questions that seeks the disclosure of an applicant’s conviction history.”

2. Employers may not inquire into or consider this conviction history of the applicant, including any inquiry about conviction history on any employment application, until after the employer has made a conditional offer of employment to the applicant.

3. Employers can only research certain areas of an applicant’s background after a conditional offer has been made.

Employers may not “consider, distribute, or disseminate information” relating to any of the following areas when conducting a conviction history background check:

(A) Arrest not followed by conviction, except in some limited circumstances set forth in Labor Code section 432.7.

(B) Referral to or participation in a pretrial or posttrial diversion program.

(C) Convictions that have been sealed, dismissed, expunged, or statutorily eradicated pursuant to law.

4. If an employer intends to deny employment based on the applicant’s conviction history, it must make an “individualized assessment” if the conviction history “has a direct and adverse relationship with the specific duties of the job.

In making his determination, the employer shall consider all of the following:

(i) The nature and gravity of the offense or conduct.

(ii) The time that has passed since the offense or conduct and completion of the sentence.

(iii) The nature of the job held or sought.

The employer is not required to record these results of this individualized assessment in writing. However, employers that are governed by local city and county background checks must be careful to follow those requirements as well.  For example, Los Angeles’ ordinance requires that employers provide this assessment in writing to applicants. 

5. If the employer preliminary disqualifies the applicant based on a conviction history, the employer is required to provide written notice to the applicant.

The notice must contain all of the following items:

(A) Notice of the disqualifying conviction or convictions that are the basis for the preliminary decision to rescind the offer.

(B) A copy of the conviction history report, if any.

(C) An explanation of the applicant’s right to respond to the notice of the employer’s preliminary decision before that decision becomes final and the deadline by which to respond. The explanation shall inform the applicant that the response may include submission of evidence challenging the accuracy of the conviction history report that is the basis for rescinding the offer, evidence of rehabilitation or mitigating circumstances, or both.

The applicant then has five business days to respond to the notice before the employer makes a final decision.  If the employee responds within this time limit, and states that they dispute the accuracy of the conviction history report and is in the process of obtaining evidence to support their position, the applicant will have an extra five business days to respond.  The employer must consider the information provided by the applicant before making a final decision.

If the employer makes a final decision denying the applicant employment solely or in part because of the applicant’s conviction history, the employer is required to provide a second written notice to the applicant containing the following:

(A) The final denial or disqualification. The employer may, but is not required to, justify or explain the employer’s reasoning for making the final denial or disqualification.

(B) Any existing procedure the employer has for the applicant to challenge the decision or request reconsideration.

(C) The right to file a complaint with the Department of Fair Employment and Housing.

In addition to this new law, California employers need to be sure they are in compliance with the Federal Fair Credit Reporting Act (FCRA) and the California Investigative Consumer Reporting Agencies Act (ICRAA) when conducting any background checks.