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 this Friday’s Five, I discuss why people should be more open to attending jury duty.  I sat for jury duty this week, but was dismissed after vior dire.  I’ve served on two juries prior to this, and maybe it is the litigator in me, but I’ve found the process fascinating.  Also, I’m tired of people complaining about the crazy jury verdicts they hear about, and then I ask if they have very been on a jury.  The typical response is that they have been successful in getting out of service.  My response then is for them not to complain about the results if they are not willing to participate in the system.

Jury duty is a great learning experience.  Plus, if you ever find yourself in litigation, you will want an impartial jury to help hear your case, so consider paying it forward in case you ever need the system.

Finally, I discuss employer’s obligations to allow employees to attend jury duty.  Additional information about the law regarding employee’s leave required to attend jury duty can be found in my prior post.

Stay dry out there California.

I bet your lawyer has never uttered those words to you (unless, of course, I am your lawyer).  For today’s Friday’s Five, I wanted to remind readers about five free resources I offer.  That’s right – they are absolutely free.  Happy Friday.Employers Survival Guide

1.  Download the termination checklist

I’m a big proponent of checklists.  Even if you have performed hundreds of employee terminations, there are so many issues that employers must get right every time, I recommend that each employer develop their own termination checklist.  Download my draft checklist as a start to drafting your own checklist for your company here.

2. Subscribe to my webinar and seminar newsletter

I’m routinely conducting webinars and seminars to California employers regarding best practices and employment law updates.  I often times waive the costs or reduce the costs for clients, friends of the firm, and readers of my blog.  You can subscribe here.

3. Subscribe to my Youtube channel – The Employment Law Report

Rather learn by watching videos?  Subscribe to my Youtube channel, The Employment Law Report.  Some popular videos are my overview of California’s paid sick leave law.  More videos to come soon.  View and subscribe to the channel here.

4. Subscribe to my blog

Receive at least weekly updates about California employment law and best practices for employers.  Reading this, right?  Might as well receive an email by subscribing here when I post a new article so you don’t miss any posts.  That is right, as always, this is absolutely free, so why not?  Subscribe to the blog by entering your email address above the big yellow button to the right.

5. Download my e-book on the top ten best HR practices

The Top Ten Best Human Resources Practices for California Employers e-book – need I say more?  Download it here.

Now you do not have any reason to not to utilize these free resources.  And don’t forget, you can find me on Facebook too.  Have a great Labor Day weekend.

 

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 addresses five common misunderstandings I’ve seen recently about employee discipline and documentation:

1. If it was not a 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, nor is there a definition of what is required to be in an employee’s personnel file.  Therefore, recollections 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 that there is 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, these are very good practices to maintain.

2. Verbal warnings do not have to be documented.

If there is no record of verbal warnings it is very difficult to prove at a later date 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 even e-mailing themselves the specifics about the verbal warning.  By preparing an e-mail and sending it to themselves, it creates a great time-stamped record that is excellent evidence should there ever be any litigation concerning a termination.

3. Employees have to sign disciplinary documents.

Some employers do not think a write-up for an employee is valid unless the employee signs the write-up, but this is not true.  While it is a good policy to have some system that proves the employee was presented with the write-up, it is not required that the employee sign the document.  Many times the employee will refuse to sign such documents because they do not agree with them.  To alleviate this, some employers provide a line on the document that states the employee does not necessarily agree with the write-up, but is signing the document only to acknowledge receipt.  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.

4. Employers have to follow a progressive disciplinary policy and 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 at is sole discretion.  As long as 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 my previous article.

5. Disciplinary documentation should be as broad as possible.

While write-up and counseling 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 an employee up for having a poor attitude, the employer should provide a specific performance issue.  The employer should 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.

Employment Law - Mid Year Update - LinkedinJoin me for a seminar for a mid-year update on California employment law issues.  Learn how to keep your company compliant with new developments in California.  Topics will include:

  • Top five pitfalls facing California employers in 2016
  • How to prepare for the Department of Labor’s changes to the overtime rules going into effect on December 1, 2016
  • Local city minimum wage and paid sick leave developments
  • Revisions to anti-harassment and discrimination regulations potentially requiring revisions to handbooks and policies
  • Q & A – bring your questions to discuss with the attorneys from my firm
  • Mixer – network with other business owners, human resource professionals, and other professionals

The event is from 4 p.m. to 7 p.m. on June 22, 2016  (seminar from 4 to 5 p.m., mixer from 5 to 7 p.m.).

Location: Westside Tavern, 10850 W Pico Blvd, Los Angeles, CA 90064 (click here for map)

1.0 SHRM and HCRI credit for HR Professionals.

$150 Regular Price/$40 for clients of VTZ and California Restaurant Association Members. If you are a client, or a CRA member, email cpeck@vtzlaw.com for promo code.

Space is limited.

For more information and registration, click here

Hope you can join us.

Another Friday, another Friday’s Five.  If you are new to the Employment Law Report, I write about a topic and include five items employers should understand on that topic every Friday.  This Friday’s Five discusses the documents employers should consider providing to employees at the end of employment.

The documents include:

  1. Notice of change of relationship
  2. For Your Benefit, California’s Program for the Unemployed – pamphlet published by the EDD
  3. HIPP notice
  4. COBRA notice
  5. For layoffs, potential WARN Act and California’s Baby-WARN Act

To download these documents and more information click here.

Click here to subscribe to the Employment Law Report Youtube Channel.

Employers should review the issue with legal counsel to ensure that they are providing the required documents for their particular situation.

Friday’s 5 is here.  This post covers five issues that commonly arise when dealing with employment Shaking handscontracts and non-competition/non-solicitation agreements.  It is a very broad area to discuss, so, as always, this is a very general overview.  However, employers and executives alike should have a basic understanding about the legalities and enforceability of such clauses in California.

1.      At-Will employment, and Labor Code Sections 2924 and 2925.

California’s Labor Code section 2922 provides that employees are at-will: “An employment, having no specified term, may be terminated at the will of either party on notice to the other.”

However, if the employer and employee enter into a contract for employment, California’s Labor Code specifically sets out that the employer or the employee may terminate any employment contract for any willful breach of the duties owed to each other.  Labor Code Section 2924 provides:

An employment for a specified term may be terminated at any time by the employer in case of any willful breach of duty by the employee in the course of his employment, or in case of his habitual neglect of his duty or continued incapacity to perform it.

Labor Code Section 2925 likewise provides:

An employment for a specified term may be terminated by the employee at any time in case of any wilful or permanent breach of the obligations of his employer to him as an employee.

2.      Agreements restraining individuals from engaging in a lawful profession is void under Business and Professions Code Section 16600. 

Employment contracts, non-competition agreements, and/or non-solicitation agreements can be challenged under Business and Professions Code section 16600.  That Section provides a very broad rule voiding any contract that limits an employee’s ability to engage in their profession:

Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.

3.      Exception to Section 16600 – Narrow Restraint

One exception to Business and Professions Code Section 16600’s prohibition on restraining an employee’s ability to work is if the restraint is narrowly drafted.  Restraints on the pursuit of “only a small or limited part of the business, trade or profession” have been upheld by California courts.  As the court in General Commercial Packaging, Inc. v. TPS Package Engineering, Inc. explained, “[A] contract does not have to impair a party’s access to every potential customer to contravene section 16600…. [A] contract can effectively destroy a signatory’s ability to conduct a trade or business by placing a substantial segment of the market off limits.”  General Commercial Packaging, Inc. v. TPS Package Engineering, Inc., 126 F.3d 1131, 1132–33 (9th Cir.1997)

There is also a strong public policy against enforcing agreements that restrict employee’s ability to work in the profession they chose.  California Courts have noted, “the interests of the employee in his own mobility and betterment are deemed paramount to the competitive business interest of the employers ….”

4.      Exception to Section 16600 – Protection of trade secrets and to prevent unfair competition

As one court has noted, “Section 16600 has specifically been held to invalidate employment contracts which prohibit an employee from working for a competitor when the employment has terminated, unless necessary to protect the employer’s trade secrets.” Metro Traffic Control, Inc. v. Shadow Traffic Network, 22 Cal.App.4th 853, 859 (1994). In addition, any such restrictions must be “carefully limited.” Id. at 861.

For example, in Gordon Termite Control v. Terrones, 84 Cal.App.3d 176, 179 (1978) the court refused to enforce an agreement prohibiting an employee from calling on any accounts he had called on while with former employer, finding “[k]nowledge of potential customers … is not a trade secret ….”

Moreover, the information must be an actual trade secret to obtain this protection.  In Gordon v. Landau, 49 Cal.2d 690, 694 (1958), the court found that an agreement restricting a door-to-door salesman from using his former employer’s confidential customer list was valid under section 16600.  However, in Letona v. Aetna U.S. Healthcare Inc., 82 F.Supp.2d 1089 (1999), the court rejected the employer’s argument that was seeking to protect information that qualified as a “trade secret” because “Aetna’s own admission that such information is ‘publicly available at Aetna’s website on the Internet” destroyed any argument that the information was secret.

5.  Out-of-State employers must be cautious about using form agreements.

Employers should heed the warning issued by the court in Letona v. Aetna U.S. Healthcare Inc. to out-of-state employers using form agreements in California:

Aetna took the contract it uses in other states and, without regard to California law, and contrary to the clear prohibition contained in section 16600, compelled its California employees to sign it or be fired. Aetna’s claim that it should not be held responsible for wrongful termination unless it “knew” the provision was unenforceable misses the mark.  Aetna knew it was operating in California and would be subject to its laws. Section 16600, or a version thereof, has been on the books since 1872. See Bosley Medical Group v. Abramson, 161 Cal.App.3d 284, 288, 207 Cal.Rptr. 477 (1984). It is not asking too much for Aetna to refrain from requiring its employees to sign presumptively illegal provisions and then firing them when they decline to do so.

Photo: Casa Thomas Jefferson

Today’s Friday’s Five focuses on five aspects of responding to employee’s complaints made on social media.  Yelp has been in the news recently (Another ex-Yelp worker is calling the company out after being fired, CNNMoney; Yelp’s Tweet About Fired Employee Could Spell Legal Trouble, Inc.com [I was quoted in this article]), for how it responded to two former employees’ complaints on social media about the company.  The incident is a great learning opportunity for employers.  Employers need to understand that this is the new reality, employees feel that they need to voice their concerns very publicly on social media, and these complaints can spread quickly.  Employers also need to plan ahead and have a system and policies in place before they are confronted with this type of situation so their response can protect the company without creating legal liability.  Here are five lessons for employers about responding to employee’s complaints on social media:

Terminations.  It is not a subject you cover in management class, or any class for that reason.  But yet the termination process is one of the more common business decisions that will receive the most scrutiny, and are probably the most legally challenged decisions in the workplace.  In addition, terminations trigger immediate legal obligations that the company must be ready to deal with on a moment’s notice.  I’ve written another article about terminations recently, and provided a webinar earlier this week on the subject (you can subscribe to receive email updates and upcoming webinars here) because I believe the topic needs more attention on the legal and management issues it raises.  Just as companies focus on making the hiring process as good as possible, the same attention needs to be given to the termination process.  Doing so will reduce liability.

1)     Do not sugar coat the reasons for a termination.

Document performance as you see it.  If the termination was for cause – document that it is for cause – don’t take the easy route out and say that the employee was laid off.  It is important to document any for cause termination (i.e. for poor performance, theft, etc.…). to defend against potential litigation.  A company does not want to be in the position of stating that the reason for termination was a layoff, but then if litigation is initiated attempting to explain that the true reason was for the employee’s poor performance.  This looks like the company is changing its reason for the termination, and will affect the company’s credibility regarding why the employee was terminated.

2)     Respect the employee during the termination process.

I do not have anything scientific here, but I’m a true believer in good bedside manner.  Most employees might not like the termination, but probably will understand the decision if they have been given proper performance reviews leading up to a termination.

3)     If offering severance, obtain a release of claims from the employee.

If a company is paying money in terms of a severance payment that is not owed to the employee, the company should obtain a release from the employee.  A release can be a simple document, sometimes a page or two, if there is not any anticipated litigation.  While offering an employee some severance pay may cost the company money in the short-term, but doing so could save a lot of time and money in the long run.  If done properly, an employee’s acceptance of a severance agreement would effectively waive any and all claims against the company.

4)     Documentation.

  • Keep payroll and time records for at least four years on a rolling basis (statute of limitations for many wage claims can extend back four years).
  • Keep personnel files for at least three years after termination.  Employers are required to keep personnel files for three years under the law, but it may be advisable to retain the files longer in order to be able to defend other claims with longer statutes of limitations, such as wage claims than can extend back four years.
  • Document paid sick leave – keep these records for at least one year, or longer.  As you may recall under California’s paid sick leave requirements effective in 2015, if an employee leaves employment and is rehired by the employer within one year, previously accrued and unused paid sick days must be reinstated.  The employee is entitled to the previously accrued and unused paid sick days in addition to accruing paid sick days upon rehiring.
  • If litigation is expected, employers should ensure documents and files are retained and kept safe until the litigation is resolved.

5)     Develop a checklist to follow for your company.

Checklists are used by pilots and doctors to ensure that nothing is overlooked.  I believe in checklists in order to avoid missing simple items during a termination, and reducing liability.  Also, the process of thinking through the steps of a termination is helpful to do when there is no pressure, and time can be taken to ensure that all aspects are addressed.  A checklist is also helpful for organizations to ensure their managers are following all of the legal and organizational requirements of a termination.