Employee terminations and resignations must be planned for in advance to avoid common pitfalls for California employers.  This Friday’s Five focuses on critical management and legal considerations during the separation process to minimize potential liability:

1. Documenting 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 the employee’s 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
  • For your Benefit (Form 2320)
  • COBRA and Cal-COBRA Notices from insurance provider
  • Notify insurance provider
  • Health Insurance Premium (HIPP) Notice

5. Retention of employee files

Employers need to take measures to secure and save employee’s file, wage, and time records.  In this regard, employers need to develop policies for the following issues:

  • What is kept in a personnel file?
  • Where is the personnel file maintained? Is it physical or electronic?  Who has access to personnel files?  If stored electronically, are the safety protocols that prevent deletion?  Are the files backed up?
  • How are time records kept? Physical or electronic?  Who has access to them?  How long are they stored for?
  • Retention of pay records: How long are pay records maintained? How easily can this data be pulled for California’s pay data reporting requirements? 

In my experience as a litigator in California, I’ve found the following five issues to be the most effective way to reduce employment-related lawsuits:

1. Owner/president/CEO is present and available.

One of the single most effective factors in reducing employment lawsuits is if the company’s leader is present at the workplace and is available to speak with employees. Generally, this creates an atmosphere in which employees feel empowered to raise issues before they become a concern.

2. HR understands compliance and takes action.

I’ve said it many times before on this blog, HR needs to be way more than processing new employees and remembering employee’s birthdays. The HR function in a company is critical in reducing liability, and sets the culture for the company. Being compliant and taking action to investigate and correct any issues is a critical to preventing many lawsuits.

3. Managers are trained and understand when to involve upper management.

A well-trained front-line management team that knows when to involve the c-suite in any potential problems will also greatly reduce liability.

4. Culture of compliance.

Company must do the following:

  • maintain complainant and up-to-date policies
  • keep current on regular mandatory trainings (such as sexual harassment prevention training)
  • train front-line managers about wage and hour issues, when it is necessary to accommodate employees, and how to properly hiring employees (meaning how to legally and effectively conduct an interview).

5. Manager and upper management must have a culture of serving the employees.

Simply put: Don’t let your managers act like Steve Jobs. Unless your start-up has a huge backer and litigation budgets are not a concern, being a demanding manager that only says what is exactly on your mind when it comes into your mind may get good results, but it will also invite litigation. Don’t get me wrong, there is nothing illegal about being a demanding manager at work, but a lot of people probably don’t understand that. Also, over 20 states have proposed legislation to make bullying in the workplace illegal, but none of these attempts have become law – yet. Plus, even if the employee understands it is not illegal behavior, it creates an environment where the employee wants to get even with a manager or founder for how they were treated. This leads them to talk to a lawyer, which may lead to a lawsuit based on some other ground. Even if a lawsuit filed against a company is frivolous, it will take time and money away from what the company is supposed to be doing.

Are there are any “predictive scheduling” requirements under California law?  Can California employers change schedules for employees without notice?  These are some of the questions I’ve dealt with lately about scheduling requirements in California.  This Friday’s Five reviews five issues California employers should understand about regulations pertaining to setting and changing schedules under California law:

1. There are no predictive scheduling requirements statewide in California

While not a requirement across California, other states and local cities within California have passed scheduling mandates that require employers to set schedules for employees well in advance, and if the employer changes the schedules within a certain time frame the employer must pay a penalty for the change.  See our prior post about Los Angeles’ Fair Work Week Ordinance that requires predictive scheduling for certain retail employers in the City of Los Angeles. 

There has been proposed legislation on a state-wide basis for predictive scheduling, but as of 2023, none of these bills have passed.  For example, in 2016, California’s legislature drafted SB 878 that proposed to require retail establishments, grocery stores, and restaurants to set employees schedules 28 days in advance, and impose penalties on the employer if the schedule is modified by the employer.  This law, and others proposed since 2016 have not become law.  Nearly every year the California legislature debates some type of predictive scheduling requirement.  With that said, California law still sets certain limits regarding scheduling employees as explained below.

2. Reporting time pay

California law requires an employer to pay “reporting time pay” under the applicable Wage Order.  This requires that when an employee is required to report for work and does report, but is not put to work or is furnished less than half said employee’s usual or scheduled day’s work, the employee shall be paid for half the usual or scheduled day’s work, but in no event for less than two (2) hours nor more than four (4) hours, at the employee’s regular rate of pay, which cannot not be less than the minimum wage.

In addition, if an employee is required to report to work a second time in any one workday and is furnished less than two hours of work on the second reporting, he or she must be paid for two hours at his or her regular rate of pay.

Employers must remember, when an employee is scheduled to work, the minimum two-hour pay requirement applies only if the employee is furnished work for less than half the scheduled time.

3. Reporting time pay: meetings and calls into work

There has been significant litigation over reporting time pay that is owed when employees are called in for meetings.  If an employee is called in on a day in which he is not scheduled, the employee is entitled to at least two hours of pay, and potentially up to four hours if the employee normally works 8 hours or more per day. See Price v. Starbucks.

However, if the employer schedules the employee to come into work for two hours or less, and the employee works at least one half of the scheduled shift, the employer is only required to pay for the actual time worked and no reporting time is owed.  See my prior post on Aleman v. AirTouch for a more detailed discussion.

The court in Ward v. Tilly’s, Inc. was presented the issue of what does “report for work” mean?  The phrase is used in Wage Order 7 to trigger reporting time pay obligations, and is not defined in the Wage Orders.  In Ward, the plaintiff was required to contact the employer two hours before the start of her on-call shifts to determine if she was required to come into work for that shift.  Plaintiff argued that being required to call her employer two hours before a potential shift to see if she was required to work that day should be considered reporting to work, which triggers the employer’s obligation to pay reporting time pay.  Given these facts, the court agreed with the employee, and held that requiring employees to call into work two hours prior to their scheduled shift to see if they were needed at work trigger reporting time pay.

4. Split Shifts

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 state minimum wage, or the local minimum wage if it is higher, 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. For example, say an employee earns $10 per hour. She works 10:00 a.m. to 1:00 p.m., and then again from 3:00 p.m. to 8:00 p.m. This is a total of eight hours worked for the day, and she is entitled to a split shift payment of one hour of pay at the minimum wage rate.  Assume, for this example, that the applicable minimum wage is $8 per hour.  Therefore, because the employee earned $16 over minimum wage ($2 above minimum wage x 8 hours = $16) for the eight hours of work, this amount can be used to offset the amount owed for the split shift pay. As a result, there is nothing owed to the employee in this example. 

5. On-Call Pay

If the employee is under the control of the employer, even if the employees are traveling to a work site or even sleeping, the employer may have to pay them for being on-call.  For example, the California Supreme Court held that security guards who were required to reside in a trailer provided by the employer at construction worksites would still need to be paid for the time they slept while on-call.  In that case, during weekdays the guards were on patrol for eight hours, on call for eight hours, and off duty for eight hours.  On weekends, the guards were on patrol for 16 hours and on call for eight hours.  The Court held that the employer was not permitted to exclude the time guards spent sleeping from the compensable hours worked in 24-hour shifts.  See Mendiola v. CPS Security Solutions, Inc.

Likewise, in Morillion v. Royal Packing Co., the California Supreme Court held that, “we conclude the time agricultural employees are required to spend traveling on their employer’s buses is compensable under Wage Order No. 14-80 because they are ‘subject to the control of an employer’ and do not also have to be ‘suffered or permitted to work’ during this travel period.”  Generally, travel time is considered compensable work hours where the employer requires its employees to meet at a designated place and use the employer’s designated transportation to and from the work site.

California’s Department of Finance provided a letter to Governor Newsom as required under Labor Code section 1182.12 to reflect the adjustment in the state minimum wage each year.  The Department announced that California’s minimum wage will increase by 3.5% to $16.00 per hour for all employers as of January 1, 2024. This Friday’s five reviews how the increase impacts California’s employers:

1. White Collar Exemptions – Salary Requirement Tied to State Minimum Wage

California’s employment laws classify employees into two main categories: exempt employees and nonexempt employees. Federal and state laws exempt certain employees from wage and hour requirements. An exempt employee is an individual who is exempt from any overtime pay or minimum wage requirements. The “white collar” exemptions are: Professional, Executive and Administrative. To qualify as an exempt employee, the employer bears the burden to meet the requirements of a two-part test the employees must meet to be exempt: (1) the salary basis test and (2) the duties test. The salary basis test requires that the employee must be paid a salary that is at least two times the state minimum wage, which will increase as California’s minimum wage increases.

With the increase to the California minimum wage on January 1, 2024, the minimum annual salary to meet the white-collar exemption increases to $66,560 per year, and $5,546.67 per month (increasing from $64,480 per year in 2023).  For more information on exempt employee classifications, see our prior article here.

2. Computer Professional Exemption Salary Requirement Increases in 2024

Labor Code section 515.5 sets forth that certain computer software employees are exempt from overtime requirements under the Labor Code. One aspect to meet this exemption is a minimum salary.  For 2023, California’s Department of Industrial Relations adjusted the computer software employee’s minimum hourly rate of pay exemption from $50.00 to $53.80, the minimum monthly salary exemption from $8,679.16 to $9,338.78, and the minimum annual salary exemption from $104,149.81 to $112,065.20 effective January 1, 2023.  The DIR will be announcing the increase for computer professionals in October 2023. 

3. Local Minimum Wage Ordinances

There are over 35 local minimum wage ordinances throughout California.  Employers are required to comply with the higher of the state or local minimum wage that applies to them.  Many of the local minimum wage rates increase on July 1 of each year, but there still are some that have a January 1 increase date.  Employers must carefully review all applicable local minimum wage (and paid sick leave) requirements.

4. Industry Specific Minimum Wages

  • Hotel Workers:

In addition to state and local minimum wage rate, some localities also have industry specific rates. The employers should always check their local ordinances that might apply to their workforce/industry. There are some cities that apply specific rates for hotel workers. For example, the City of Long Beach and the City of West Hollywood have adopted ordinances requiring a higher minimum wage for these workers.

  • FAST Act – Fast Food Workers:

As we have written about on this blog, on September 5, 2022, California Governor Gavin Newsom signed into law AB 257, termed the Fast Food Accountability and Standards Recovery Act or FAST Recovery Act.  The law proposes to establish a Fast Food Sector Council to regulate California’s fast food restaurants and set the minimum wage rate, among other workplace regulations, for the fast food industry. However, the law has been challenged and a coalition, the Save Local Restaurants Coalition, submitted over one million signatures on December 5, 2022, in opposition to the FAST Act and now the bill will be on the November 2024 ballot as a referendum for California voters to decide the fate of the law.

5. Planning For Minimum Wage Increases

As employers start to prepare for 2024, some best practices for ensuring compliance with all minimum wage requirements include:

  • Review all exempt employee classifications and specifically list which exemption they qualify for and ensure they are paid the statutorily required salary.
  • Develop a chart listing all nonexempt employees by location and ensure compliance with the location where the employee is working.
  • Audit your payroll processing company to ensure they are updating the minimum wage and salary payments to employees. Do not rely on your payroll company to know or understand the minimum wage requirements here in California.

Finally, there is an initiative that qualified for the November 2024 ballot that would increase California’s minimum wage to $18 per hour and then increase each year based on the cost of living.  Employers will need to continue to monitor this initiative in 2024.

Parties involved in litigation should always keep an open mind about mediation at every stage of litigation.  Cases that resolve without having to go through a trial or arbitration can potentially save the parties a lot of time and money in litigation.  This article touches on five items parties need to understand about mediation.

1. Mediation is non-binding.
Mediation is a voluntary process in which litigants (or even parties prior to litigation) agree to use a private third-party to help settle the case. People sometimes confuse mediation with arbitration. Arbitration is when parties agree to use a private third-party to hear their case, much like a judge, to make decisions about the case, and eventually decide the case. Arbitration can be binding on the parties, and the arbitrator actually decides who is right and wrong as a matter of law. On the other hand, a mediator is not deciding any issues about the case, but is simply hearing both sides’ positions, and then works with the parties to see if there is a potential resolution that the parties would both agree to. The mediator has no ability to decide issues of the case, or make any binding rulings about the case. The mediator is only an unbiased third-party attempting to get the parties to consider a possible resolution to the case.

2. Mediation takes place with a private mediator, usually not the court.
The parties voluntarily agree upon the selection of a mediator. Usually the mediator has expertise in the area of the law that the case involves so that he or she can move quicker into the substance of the parties’ disagreement. There are many retired judges or lawyers that work as mediators. Some mediators are active practicing lawyers that also have a mediation service established.
The mediation usually takes place at the mediator’s office. Normally the mediator has the parties in separate rooms, and the mediator walks between the two rooms. There are many mediations during which the parties will not see other side the entire day.

3. Negotiations during the mediation are privileged and cannot be used against either party during litigation.
California law prevents any of the negotiations or potential admissions made during mediation from being brought up in court or during litigation. The rationale for this rule is that the courts want people to be able to negotiate during mediation, this involves some give and take. Therefore, in order to assist the mediation process, any of the discussions or negotiations during mediation are prevented from being used against the other party. This allows parties to discuss items more freely during mediation in hopes of having a better chance at resolving the case. However, it should be noted that if a party makes an admission during mediation, the other party can still conduct discovery after the mediation and bring that admission into the case through the standard discovery process. So parties should follow their counsel’s advice about which facts to share during the mediation process. But rest assured, the fact that one party agreed to offer a certain amount to settle the case during mediation, this offer to settle cannot be brought up to the jury later in the case as a way to establish liability.

4. The mediator’s only role is to get the case settled.
The mediator is not there to make friends, tell you if she believes you more than the other side, or make a value judgment about the case or people involved. His or her role is simply to get the case resolved. This usually means that a successful mediator is able to have each party questioning the strength of their case. A successful mediation usually means that both sides are unhappy with the resolution.

5. Even if the case does not settle at mediation, it could still be a successful mediation.
The parties need to understand that mediation is a process and it is hard to settle cases in one day – even a long day – of mediation. Sometimes it is clear during the mediation that the parties cannot settle the case. Sometimes it takes the mediator working with the parities for weeks after the mediation to arrive at a settlement. If the case does not settle, it is also beneficial for the parties to realize that maybe they are still too far apart to agree to a settlement and there needs to be further discovery and/or motions filed to narrow down the issues that are being litigated.

By Pooja Patel and Anthony Zaller

July was a busy month for California employment law issues.  The issue that dominated the news in July was the California Supreme Court’s ruling in Adolph v. Uber Technologies, LLC holding that employers cannot implement arbitration agreements with employees that waive the employee’s ability to bring claims on behalf of other employees, effectively overruling the U.S. Supreme Court’s Viking decision issued last summer.  While this was a significant development that California employers need to assess, there are a number of other new developments that occurred in July.  Here is a roundup of the other key issues impacting employers:

1. New I-9 Form and changes to verification process – November 1, 2023 deadline to implement.

On July 21, 2023, the U.S. Citizenship and Immigration Services (USCIS) announced that it will release a new I-9 form on August 1, 2023. Employers may use the current I-9 form through October 31, 2023. Beginning November 1, 2023, Employers will be required to use the new I-9 form. While the new form has not been published yet, it appears to streamline and simplify the process. The changes include a checkbox for employers to check if they examined the I-9 documentation remotely, instead of by physical examination.

The Department of Homeland Security (DHS) has also ended the temporary COVID-19 rule that allowed for flexibility for in-person examination of the I-9 documentation. Moving forward, only employers who participate in E-Verify may examine the 1-9 documents electronically:

Employers who do not participate in E-Verify:

By August 30, 2023, must physically examine the identity and employment authorization documentations for all individuals hired on or after March 20, 2020, whose documents were previously only examined by virtual or remote examination under the COVID-19 flexibilities. Additionally, beginning August 1, 2023, these employers must perform in-person examinations.

Employers who participate in E-Verify:

Effective August 1, 2023, employers who participate in E-Verify and are in good standing, may examine the I-9 documents electronically using a live video call. As a reminder, employers who participate in E-Verify must photocopy all U.S. passports, passport cards, Permanent Resident Cards (Form I-551), and Employment Authorization Documents (Form I-766) and retain them with the Form I-9.

It is recommended that California employers develop and update a new hire packet each year.  Given this new I-9 requirement, it is a good time for employers to update their entire new hire packet (and review and update their arbitration agreements given the Uber ruling). 

2. Employees boast about having “lazy girl jobs.”

Social media has created new and rapidly evolving trends in the modern workforce.  Another recent trend, sparking intense debates across the internet, is the phenomenon known as the “Lazy Girl Job.” As reported by the Wall Street Journal, a “Lazy Girl Job” is characterized by remote work, a laid-back boss, fixed working hours until 5 p.m., and an annual salary ranging from $60,000 to $80,000.  Is it merely a shift in priorities among the younger generation, seeking better work-life balance? Or does it place unreasonable expectations on employers, where employees anticipate high pay for lesser work?

The pandemic changed employees’ outlook on work.  Just like the “quiet quieting” trend, the “lazy girl job” discussion is yet another aspect of employees reevaluating their goals in life.  Employers need to recognize that not all employees are motivated by money and have the drive to become an executive who works 80 hours a week.  It is important to recognize this and have jobs and positions that fit each employee’s goals. 

3. California’s Industrial Welfare Commission receives funding to issue updated Wage Orders in 2024.

Governor Newsom signed AB 102 on July 10, 2023 and a part of that bill funds the Industrial Welfare Commission (IWC) to reconvene to issue wage orders regulating the “wages, hours, and working conditions” for various industries.  Therefore, employers need to expect new regulations in nearly every industry (as the current wage orders cover most industries) by October of 2024.  AB 102 specifies that the wage order “shall not include any standards that are less protective than existing state law.” 

Of concern for employers is that the IWC is made up a panel of appointed individuals and have quasi-legislative power to adopt wide-ranging employment regulations across California, but the process of adopting new regulations is not as open to public review compared to the legislative process.  Just as the legislature is attempting to delegate its authority to an appointed council in the FAST Act, AB 102 is a clear move in delegating authority to unelected governing bodies, such as the IWC.  This permits the governing bodies to issue unpopular regulations without having the elected officials to account for the new regulations with the voters.  This is a concern, and it I am expected that we will be discussing the new wages orders and regulations extensively next year. 

4. Report finds that nearly half of employees spend half of their workday on social media.

A new report finds that 48% of employees spend up to four hours a day during work on social media for personal use.  As reported by SHRM, a Monster Worldwide survey found that employees are spending nearly half of their working time on social media. The next question usually posed by employer is how they stop this from occurring.  But should employers embrace employee’s use of social media on the job? I’m of the opinion that social media has become a critical part of our lives – it is how we stay informed on current events, stay on top of what competitors are doing, and stay in touch with colleagues. Regardless, if social media did not exist, employers who were not engaging their employees or had unengaged employees still faced this problem, but the employees would have done something else with their time at work, such as read a book or day dream. I’d be curious to hear your thoughts: Is employee use of social media at work a problem, or should it be encouraged?

5. Zaller Law Group webinar discussing the impact of Adolph v. Uber Technologies on Thursday August 3, 2023. 

As we reported on earlier, the California Supreme Court issued a game-changing decision in Adolph v. Uber Technologies for California employers. It effectively overruled the U.S. Supreme Court’s decision in Viking River Cruises, clearing the way for employees to bring a case on behalf of other employees in PAGA cases against employers. What does this mean for you as an employer? Our seasoned PAGA litigation attorneys are here to give you a deep dive into the impact of this ruling, practical guidance, best practices, and what the future might look like.  Join us on Thursday, August 3, 2023 – registration is here.

In Adolph v. Uber Technologies, Inc., the California Supreme Court held that even when an employee enters into an arbitration agreement requiring the employee to arbitrate only their individual claims, the employee still has a right to continue to pursue remedies under California’s Private Attorneys General Act (PAGA), if they are able to win on their individual claims in arbitration.  The California Supreme Court was quick to overturn the U.S. Supreme Court’s decision in Viking River Cruises, Inc. v. Moriana issued last summer, which provided employers with some hope to limit PAGA litigation.  Here are five key issues California employers must understand about the issues in the Uber decision:

1. Quick refresher on the California’s Private Attorneys General Act (“PAGA”).

PAGA was enacted in 2004 to authorize aggrieved employees to file lawsuits against employers on behalf of themselves, other employees, and the State of California for Labor Code violations.  PAGA allows aggrieved employees to act as a “Private Attorneys General” to seek remedies against their employer not only for the violations committed against them, but also to recover any violations committed by their employer against other employees.  The plaintiff’s ability to bring claims on behalf of other employees is referred to as “non-individual claims.”

California’s PAGA was designed by the California Legislature to offer financial incentives to private individuals to enforce state labor laws to recover certain civil penalties. The issue regarding whether employers can implement arbitration agreements with PAGA representative waivers was addressed by the U.S. Supreme Court in June 2022 in Viking River Cruises, Inc. v. Moriana. 

2. U.S. Supreme Court’s Decision in Viking River Cruises, Inc. v. Moriana in June 2022 looked promising for California employers.

In June 2022, the U.S. Supreme Court held in Viking River, that California law (and the prior holding by the California Supreme Court in Iskanian v. CLS Transportation Los Angeles, LLC) “cannot condition the enforceability of an arbitration agreement on the availability of a procedural mechanism that would permit a party to expand the scope of the arbitration by introducing claims that the parties did not jointly agree to arbitrate.” Therefore, the U.S. Supreme Court found that the Federal Arbitration Act preempted California law and permitted employers to implement arbitration agreements that required employees to bring only their individual claims and not PAGA representative (non-individual) claims in arbitration.  The U.S. Supreme Court said that, as it understood PAGA, because the employee had to arbitrate their individual claims, the employee would not be entitled to continue with their non-individual PAGA claims because PAGA did not provide a method for the employee to continue with their non-individual claims on behalf of other employees in court.  Justice Sotomayor’s concurring opinion in Viking stated that “[o]f course, if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word.”  Jumping on this opening, and only a few weeks after the Viking River decision, the California Supreme Court granted review in Adolph v. Uber Technologies to address this issue. 

3. In Adolph v. Uber, the California Supreme Court rejected the U.S. Supreme Court’s interpretation of PAGA, and held that even through employees may be required to arbitrate their individual claims, they still can potentially continue with a PAGA claim.

In Uber, the California Supreme court reviewed the issue of whether an employee who has been compelled to arbitrate his or her individual claims “maintains statutory standing to pursue non-individual ‘PAGA claims arising out of events involving other employees’ in court.” 

The California Supreme Court explained that in order to have standing to bring a PAGA claim as an “aggrieved employee,” the plaintiff must be “(1) someone who was employed by the alleged violator and (2) someone against whom one or more of the alleged violations was committed.”  The Court explained that this standing requirement is very easy to meet, and as it held in Kim v. Reins International California, Inc., a plaintiff that settled and dismissed his individual claims for damages, still had standing to proceed with his PAGA claims on behalf of other employees.  The Court in Uber continued to explain that PAGA does not require the plaintiff to have an ongoing injury, and that “post-violation events” do not “strip an aggrieved employee of the ability to pursue a PAGA claim…” and went even further in citing Johnson v. Maxim Healthcare Services, Inc., which held that even when a plaintiff’s individual claim may be time-barred as outside of the statute of limitations, this does not prevent the plaintiff from pursuing PAGA remedies. 

4. The Uber decision draws a roadmap for employers in litigating PAGA claims: (1) enforce arbitration agreement, (2) stay the non-individual PAGA claim during arbitration, and (3) a win against the plaintiff in arbitration can prevent the plaintiff from bringing the PAGA claim.

Despite disagreeing with the U.S. Supreme Court’s decision in Viking, the California Supreme Court clarified the roadmap for employers in litigating PAGA cases.  Employers who have arbitration agreements can enforce the agreement, and “the trial court may exercise its discretion to stay the non-individual claims pending the outcome of the arbitration pursuant to section 1281.4 of the Code of Civil Procedure.  Following the arbitrator’s decision, any party may petition the court to confirm or vacate the arbitration award under section 1285 of the Code of Civil Procedure.”  The Court continued to explain that, “If the arbitrator determines that [the plaintiff] is not an aggrieved employee and the court confirms that determination and reduces it to a final judgment, the court would give effect to that finding, and [the plaintiff] could no longer prosecute his non-individual claims due to lack of standing.” 

Even if the employer is not successful in winning on all claims in arbitration, the Uber decision nearly forces every employer to take the case through arbitration for the chance of a complete win, which would bar the employee from continuing in bringing a representative action on behalf of other employees in the PAGA case.  Even if the employer does not achieve a complete win in arbitration, the process will provide key discovery and binding testimony from the plaintiff, will likely expose how individualized resolution of the key issues is, and show how long and complicated a trial could potentially take to resolve issues for all employees across the workforce.  This could open potential arguments that the PAGA representative case has trial manageability issues that the plaintiff cannot overcome. 

5. Next steps for employers after the Uber decision.

Review current arbitration agreements and update terms:  California employers need to review their current arbitration agreements with counsel to ensure that they are (1) enforceable and (2) have the correct language to get the most out of enforcing arbitration of employment claims.  For example, employers should consider adding language the agreement will be enforced under section 1281.4 of the Code of Civil Procedure, whereby the trial court must stay the non-individual claims pending arbitration of the plaintiff’s own individual claims.  Employers should also review whether all or most of their workforce have signed the applicable arbitration agreement and review the agreement in place to see if employees who have worked for the company for a long time need to sign an updated agreement. 

Arbitration agreements are still beneficial for most employers in California:  The holding in Uber does not change the prior rule that employers may have employees waive their ability to bring a class action lawsuit, which still provides a huge benefit to employers.  For example, the applicable statute of limitations in a class action lawsuit can extend back four years, and the statute of limitations in a PAGA case is only one year.  Employers should be able to track which employees have not signed arbitration agreements, have a method of easily obtaining copies of all signed arbitration agreements, and periodically review if their arbitration agreements need to be updated and which employees need to sign the updated versions.  Of course, arbitration agreements are not right for all California employers, but companies should review their issue carefully with experienced employment counsel. 

As employers grow and hire new employees, it is important that employers and their authorized representatives are up to date on various on boarding requirements. One of these requirements come from the U.S. Citizenship and Immigration Services. The Form I-9 is required for all employers who hire employees in the United States. This Friday’s Five provides employers and their authorized representatives with answers to five questions about the Form I-9.

1. What is a Form 1-9?

Form I-9 is a federal requirement to verify the identity and employment authorization for all individuals hired for employment in the United States. This form requires the employee to provide their information and affirm that they are authorized to work in the United States, and the employer to review and verify the documentation provided by the employee. The Form I-9, including instructions, can be found here: https://www.uscis.gov/i-9

2. What are employers’ obligations regarding the Form I-9?

The employer, or authorized representative, should first review Section 1 to ensure that the employee completed it properly. Then, the employer should review the documents from the Lists of Acceptable Documents provided by the employee, in the presence of the employee. The employer should ensure that the document is an unexpired original (a certified copy of a birth certificate is acceptable). The employer should complete the information requested in Section 2 based on the information provided. The individual who physically examined the original document(s) and completed Section 2, must sign their name and attest that, to the best of their knowledge, the employee is authorized to work in the United States, and if the employee presented document(s), the document(s) they examined appear to be genuine and relate to the employee.

 Practice tip: An employer cannot specify which documents the employee can or cannot present from the list. Both California and Federal Law prohibit an employer from discriminating against employees on the basis of their citizenship status, immigration status, or national origin.

3. Do employers need to photocopy the documents presented?

No, unless the employer participates in E-Verify. If the employer chooses to photocopy any documents, then they should do so consistently for all new hires and retain them with the Form I-9. If the employer participates in E-Verify, you must photocopy all U.S. passports, passport cards, Permanent Resident Cards (Form I-551), and Employment Authorization Documents (Form I-766) and retain them with the Form I-9.

4. How to maintain Form I-9’s?

Completed Form I-9’s and any photocopied documents should be maintained together and, in a file, separate from the employee’s personnel file. Employers must retain these documents for three years from the date of hire, or one year after separation of employment. The documents should be maintained in a way that they can be produced within three business days of an inspection request from the Department of Homeland Security, the Department of Justice’s Civil Rights Division, Immigration and Employee Rights Section, or U.S. Department of Labor.

Employers may maintain these documents electronically by scanning and uploading the original and destroying the original. However, if they choose to do so, they must ensure they follow all of the electronic records security requirements outlined here. 

5. What if the employee does not speak English?

If an employee utilizes a preparer and/or a translator to assist them in completing Section 1, they must check the appropriate box at the end of Section 1 and complete the rest of the box, including the name and address of the preparer or translator. If the employee uses more than one preparer and/or translator, they must complete Form I-9 Supplement to list each preparer and/or translator that helped the employee.

I have published this post since 2015 recognizing the Fourth of July (one of my favorite holidays).  Hopefully I’ll be able to keep publishing it for many years to come.  Wishing you a great Fourth, and hope you have some time to put aside your work for a bit and enjoy some time with your family.  Happy Fourth of July!

Five things I’m thankful for this Fourth of July:

1.     For the great risk and sacrifice our Founding Fathers took to establish the country. 

When learning about the Founding Fathers in high school history class I did not have a perspective about the risks the Founders took in establishing the country.  Only now that I have a business, a family, and am relatively successful, can I realize the huge risks the Founders took.  By all means, they were the establishment, the elite of the American society, and if anyone had an interest in preserving the status quo, it was them.  Their sacrifices of life (theirs and their family members) and their fortunes helped build the foundation we benefit from today.

2.     The ability to speak freely and practice or not practice any religion I want.

It is great being able to freely speak your mind and believe in whatever you want.  It is also great be free to practice (or not) any religion you want.  We live in a very tolerant society, and it is even better when the government is not telling you how to live your life.  It is important to remember that throughout history, this is the exception for how a government normally behaves.

3.     Our Country’s ability to attract creative people.

People that like creating things and being productive want to practice their trade where the government will basically leave them alone and provide a good environment to protect their gains derived from their hard effort (see item #5 below).  The U.S. provides this environment, and that is why so many people come to the U.S. to create a business or to practice their trade.  It is also important to recognize how lucky we are to be in the U.S.

4.     My right to practice any profession and access to unlimited resources to learn the required skills.

No one is dictating what students need to be after they graduate high school or college.  Everyone is free to pursue their interest, and the market decides the value of the effort.  With basically any information freely available on the Internet, anyone can learn almost any skill, and like no other time in human history individuals have an almost free method to sell their services or products over the Internet.  In your mid-40’s and want to make a career change?  Perfect, and you don’t even need to go back to school as the information is freely available on the Internet.  Didn’t finish college and are 20 years old with an idea?  Perfect.  Venture capitalists don’t care about your pedigree, they are only interested if you work hard and don’t give up.

5.     Our legal system.

Yes, it sounds trite.  But while I don’t think our legal system is perfect by any means, it is the best system established in the history of mankind.  Everyone living in the U.S. presently is very lucky to have this benefit.  It is a foundation for many of the items I mentioned above.  Because people have a good basis for predicting the outcomes of their actions, such as being able to retain property legally obtained, and knowing if someone breaches a contract there will be repercussions, it creates an environment that attracts hard effort and the best talent from around the world.  This is why the U.S. has been the leader in ideas and new businesses.  However, just because the system is established does not mean our work is done.  We have to be vigilant not to lose the fairness, reasonableness, and lack of corruption in the legal system.

Happy Fourth of July!

It is a common argument by plaintiff’s counsel in wage and hour class actions: The employer’s policy that requires the employee to remain on the company premises during 10-minute rest breaks facially violates California law.  Because the employer has a facially invalid rest break policy, it is a company wide policy that is uniform, and is an issue that should be certified as a class action or entitle the Plaintiff to penalties under the Private Attorneys General Act (PAGA).

However, there are many cases that support the position that an on-premises rest break policy is not facially invalid, and that such a policy, alone, is not sufficient to establish that the employer did not relinquish control as to how the employees spent their rest breaks. The key factor is whether the employer controlled how the employee spent their rest break time, in addition to requiring the employee to remain on premises, such as limiting the employees to stay close to their work area for example. Here are five key cases discussing on-premises rest break policies under California law:

1. Augustus v. ABM Security Services Recognized There Exist Practical Limitations Where an Employee Can Go During a 10-minute Rest Break.

In Augustus v. ABM Security Services (2016), the California Supreme Court held that by requiring employees to remain on call by monitoring a pager during a 10-minute rest break violated California law.  Our prior analysis on Augustus can be read here.  However, the Supreme Court was clear that because the 10-minute rest breaks are only 10-minutes, there are “practical limitations on an employee’s movement.”  The Court continued, “Thus, one would expect that employee will ordinarily have to remain on site or nearby.  This constraint, which is of course common to all rest periods, is not sufficient to establish employer control.”  It was the additional requirement in the Augustus case were the employees had to carry a pager and respond to the employer’s calls during the break that provide the facts for the Supreme Court to hold that the employer violated the 10-minute rest break obligations.

Many Courts have acknowledged the California’s Supreme Court’s holding in Augustus regarding on premises rest breaks.

2. Hubbs v. Big Lots Stores (C.D. Cal., July 11, 2018): A United States District Court for the Central District of California rejected the argument that a policy requiring employees to remain on the premises during the 10-minute rest break reflects the exercise of employer control that qualifies the time as on-duty work. The Court noted that an employer may not require employees to remain “on call” during a ten-minute rest period, Augustus nevertheless recognized that an employer may require an employee to remain “on premises” during such rest periods. The Court stated that Augustus acknowledged that “employers must . . . relinquish any control over how employees spend their break time” and that “compelling employees to remain at the ready, tethered by time and policy to particular locations or communication devices” imposes job-related duties and constitutes employer control because employees are not “free[] to use rest periods for their own purposes.” That requiring employees to remain “on site or nearby” during a ten-minute break was “not sufficient to establish employer control.”  The Court stated that Augustus concluded that these were short breaks, and this restriction was a “practical limitation[] on an employee’s movement” permitted under California law.

3. Schmidtberger v. W. Ref. Retail (C.D. Cal., Sep. 28, 2021): In Schmidtberger the court rejected Plaintiff’s contention that a policy of requiring employees stay on the premises during rest breaks is invalid facially. The Court stated that in Augustus, the California Supreme Court explained that “[b]ecause rest periods are 10 minutes in length . . . one would expect employees will ordinarily have to remain on site or nearby.”  This restriction “which is common to all rest periods, is not sufficient to establish employer control.” The Court also noted that multiple federal courts have implemented a straightforward interpretation of California law established in Augustus, and have dismissed arguments establishing liability on an employer’s policy of prohibiting off-premises rest breaks.

4. Ritenour v. Carrington Mortg. Servs. (C.D. Cal., Sept. 12, 2018): Plaintiffs alleged that the rest break policy was “facially unlawful” under Augustus v. ABM Security Services, Inc., and guidance from the California Division of Labor Standards Enforcement (“DLSE”). After Augustus, the DLSE’s website page of Frequently Asked Questions directly addressed the issue of whether an employer can require an employee to stay on the worksite during a rest period. Citing to Augustus, the DLSE stated, “No, your employer cannot impose any restraints not inherent in the rest period requirement itself.” (See DLSE FAQ #5 here).

The Court held that Plaintiffs failed to show that Defendant’s rest period policy requiring employees to remain on site is facially invalid. The Court held that the policy did not conflict with Augustus and that the California Supreme Court never stated that an employer cannot require an employee to remain on the premises during a rest period. Moreover, the court held that the DLSE’s expansive interpretation of Augustus in a Frequently Asked Questions page is neither binding on nor persuasive to the court. Indeed, the DLSE’s FAQ even notes that “[a]s a practical matter,” when an employee receives a 10-minute rest period, “the employee can only travel five minutes from a work post before heading back to return in time.”

5. Bowen v. Target Corp. (C.D. Cal., Mar. 27, 2020):  The Court assessed whether Plaintiffs could state a viable claim based on an “on-premises rest period theory” — the theory that employers who force their employees to remain on-premises for the duration of a rest period effectively fail to provide a rest period at all.  In concluding that Plaintiffs had failed to state a claim, the Court observed that a “rest period” was defined in the Wage Order as “time during which an employee is relieved from all work-related duties and free from employer control.” After the Court defined rest periods, it turned to the California Supreme Court’s opinion in Augustus v. ABM Sec. Servs. to determine whether an on-premises rest period policy constituted sufficient “employer control” to deprive employees of a rest period. Focusing on language in Augustus that practical and temporal constraints common to all rest periods meant that “employees will ordinarily have to remain on site or nearby” and that “this constraint… is not sufficient to establish employer control,” the Court held that Target’s alleged on-premises rest period policy did not constitute sufficient “employer control” to deprive employees of a rest period. As a result, the Court dismissed Plaintiffs’ claims to the extent they relied on an on-premises rest period theory.

While there is case law supporting on-premises rest breaks, this type of policy is routinely challenged by plaintiffs in California, and employers need to review these types of policies with employment counsel.  This issue is a good example on how a simple sentence in an employee handbook could potentially create huge amounts of liability for the employer.