Employers usually face defamation claims in connection with wrongful termination allegations.  Defamation claims can arise in twoNestor Galina forms: libel (written) and slander (spoken).  Defamation can result from a variety of different scenarios, such as: statements made to others during a workplace investigation, explaining to colleagues the reasons why an employee was terminated, the employee’s claim that the reason for his termination was false, or in connection with job references.  This Friday’s Five helps employers understand what can constitute a claim for defamation, and potential defenses.

1.     Two Types Of Defamation: Libel And Slander

In order to prove a libel or slander claim, the employee must prove: (1) false communication; (2) unprivileged statement of fact (not opinion); (3) it was made about the plaintiff; (4) published to a third party; and (5) caused damage to the plaintiff.

For libel, which is written, the communication must expose plaintiff to “to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation.”  See Cal. Civil Code section 45.

To prove slander, which is verbal, the communications must charge plaintiff with a crime, imputes him with an “infectious, contagious, or loathsome disease”, or “impotence or want of chastity”, or tends directly to injure plaintiff in his occupation.  See Cal. Civil Code section 46.

2.     A Plaintiff does not have to prove damages for defamation “per se”

Certain communications eliminate the need for the plaintiff to prove special damages (see below for definition of special damages), and these communications are called defamation per se.  Slander per se are words that “fall within the purview” of Civil Code section 46.  Libel per se is “defamatory of the plaintiff without the necessity of explanatory matter, such as inducement, innuendo or other extrinsic fact…”  Therefore, if the defamatory statement is not apparent on its face and requires an explanation of the surrounding circumstances (the `innuendo’) to clarify the meaning, it is not libelous per se.

For example, statements claiming that a doctor committed extortion, lied under oath, prescribed medications without a license are defamation per se.  See Burrill v. Nair (2013) 217 Cal. App. 4th 357, 384-385.

3.     Publication required

There needs to be publication in order for a statement to constitute defamation.  However, even making the statement to one person can constitute publication.  Usually if the plaintiff makes the publication of the statement herself, it cannot be defamation.  However, if the plaintiff is under a strong compulsion to disclose to others the defamatory statement, this could constitute publication even though the plaintiff makes the statement herself.  This argument arises when the plaintiff alleges that the company provided false and defamatory reasons for a termination, and then when attempting to obtain a new job the plaintiff must disclose the statements to prospective employers during the interview process to explain the past employment situation.

4.     Certain Workplace Communications Are Protected From Defamation Claims

Employers are protected under a qualified privilege when they communicate without malice with a person who has a common interest in the subject matter of the communications.  For example, a court held that an employee’s report of alleged sexual harassment by a co-worker made to a health care provider and the company’s human resources personnel was privileged, and therefore not defamation.  In addition, in some cases courts have held that statements made without malice by the employer to other employees about the reasons for an employee’s termination are privileged because the employer and employees have a common interest in maintaining safe workplaces and job efficiency.  However, employers still need to be very careful in what they communicate to others within the company, and should usually keep the information limited to individuals who have a need to know.

5.     Damages Available To Plaintiffs

Plaintiffs are entitled to recover different damages depending on the type of defamation they have proven as part of their case.  The California Civil Code sets forth the following damages based on the underlying conduct and malice involved in the statements:

(a) “General damages” are damages for loss of reputation, shame, mortification and hurt feelings;

(b) “Special damages” are all damages which plaintiff alleges and proves that he has suffered in respect to his property, business, trade, profession or occupation, including such amounts of money as the plaintiff alleges and proves he has expended as a result of the alleged libel, and no other;

(c) “Exemplary damages” are damages which may in the discretion of the court or jury be recovered in addition to general and special damages for the sake of example and by way of punishing a defendant who has made the publication or broadcast with actual malice.

See Cal. Civil Code section 48(a).

Photo: Nestor Galina

In July 2015, Governor Brown signed legislation designed to overturn the decision in Rope v. Auto-Chlor System of Washington Inc.  The case involved an employee who was asking his employer for an accommodation to take a future leave of absence in order to donate a kidney to his sister.  As discussed below, the case raises many issues that employers should be aware of, especially the new law effective 2016 making requests for accommodations a protected activity.

1.    AB 987 makes a request for reasonable accommodation a protected activity

AB 987 was signed into law by Governor Brown on July 16, 2015, which amends Section 12940 of the Government Code and becomes effective January 1, 2016.  The law was passed to overturn the court’s ruling in Rope v. Auto-Chlor System of Washington Inc.  In the case, Plaintiff Rope alleged he suffered retaliation for engaging in the FEHA “protected activities of requesting leave for his sister’s disability/medical condition.”  FEHA makes it illegal “[f]or any employer … to discharge … or otherwise discriminate against any person because the person has opposed any practices forbidden under this part….” (Gov. Code, § 12940, subd. (h).)

To state a claim of retaliation under FEHA, a plaintiff must show: (1) he engaged in a protected activity, (2) he was subjected to an adverse employment action, and (3) there is a causal link between the protected activity and the adverse employment action.

The issue in the case was whether a request for an accommodation could be a protected activity?  The defendant argued that the plaintiff did not engage in a protected activity because he did not claim to have “`oppose[d] any conduct forbidden'” by FEHA, and the court agreed.  The court held that an employee’s request for paid leave in order to donate one of his kidneys to his sister was not a protected activity.  The court stated:

Nevertheless, we find no support in the regulations or case law for the proposition that a mere request — or even repeated requests — for an accommodation, without more, constitutes a protected activity sufficient to support a claim for retaliation in violation of FEHA. On the contrary, case law and FEHA’s implementing regulations are uniformly premised on the principle that the nature of activities protected by section 12940, subdivision (h) demonstrate some degree of opposition to or protest of the employer’s conduct or practices based on the employee’s reasonable belief that the employer’s action or practice is unlawful.

In response, the legislature passed AB 987 and the Governor signed the bill into law.  The law makes an employee’s request for an accommodation a protected activity for which the employer cannot take any adverse employment actions against the employee because of the request.  AB 987 states:

Notwithstanding any interpretation of this issue in Rope v. Auto-Chlor Sys. of Washington, Inc., (2013) 220 Cal. App. 4th 635, the Legislature intends (1) to make clear that a request for reasonable accommodation on the basis of religion or disability is a protected activity, and (2) by enacting paragraph (2) of subdivision (m) and paragraph (4) of subdivision (l) of Section 12940, to provide protection against retaliation when an individual makes a request for reasonable accommodation under these sections, regardless of whether the request was granted.

2.      Complaints only made internally to employer are not sufficient to state a claim under the whistle blower statute, Labor Code section 1102.5

Plaintiff Rope also alleged that the company violated Labor Code section 1102.5, which prohibits an employer from adopting a policy to prevent an employee from divulging to a government or law enforcement agency information the employee reasonably believes discloses a violation of a state or federal law, retaliating against an employee who reveals such information to a governmental agency, or from retaliating against an employee who refuses to engage in conduct that would result in a violation of a statute.

The court held that the plaintiff did not have a viable whistle blower claim under Labor Code section 1102.5 because he did not report his suspicions of unlawful activity to any governmental agency, or that he refused to violate the law at the request of his employer.  His internal complaint to the company “does not trigger whistle blower protection under Labor Code section 1102.5. (Green v. Ralee Engineering Co. (1998) 19 Cal.4th 66, 77 [§ 1102.5, subd. (b) “does not protect plaintiff, who reported his suspicions directly to his employer”].).”

3.    Donation Protection Act – Requires employers to provide up to 30 days of paid leave for employee who donates an organ

One of the issues in the case  involved the Donation Protection Act (DPA).  The DPA provides that as of January 2011, private employers with 15 or more employees must grant “[a] leave of absence not exceeding 30 days to an employee who is an organ donor in any one-year period, for the purpose of donating his organ to another person.”

4.    Plaintiffs can assert FEHA claims if they are not disabled but are “associated with a person who has or is perceived to” be disabled

FEHA provides that it is unlawful for “an employer, because of the … physical disability … of any person, to … discharge the person from employment … or to discriminate against the person … in terms, conditions, or privileges of employment.” (§ 12940, subd. (a).)  The statute also prohibits discrimination on the basis of physical disability “includes a perception that the person has any of those characteristics or that the person is associated with a person who has, or is perceived to have, any of those characteristics.” (§ 12926, subd. (n)).

To state a FEHA claim, a plaintiff need only “show that: he or she was a member of a protected class; was qualified for the position he sought; suffered an adverse employment action, and there were circumstances suggesting that the employer acted with a discriminatory motive.”

The court reasoned that the plaintiff’s request for leave under the DPA would cause the employer to incur certain expense; and the facts could support a reasonable inference is that the employer acted preemptively to avoid an expense stemming from plaintiff’s association with his physically disabled sister.

5.    Anticipated disability is not covered under FEHA

The court made it clear that in order to state a discrimination claim under FEHA, a plaintiff must be physically disabled, or have a “disease, disorder, condition, or health impairment that might become a ‘physical disability.’”  Given the facts of this case, the court held that the plaintiff could not state a claim for actual or perceived disability discrimination under FEHA:

 Rope has not established that he is himself physically disabled, and does not claim an ability to cure this fatal defect. At most, Rope alleges only that he anticipated becoming disabled for some time after the organ donation. This is insufficient. Rope cannot pursue a cause of action for discrimination under FEHA on the basis of his “actual” physical disability in the absence of factual allegations that he was in fact, physically disabled.

In this Friday’s Five I wanted to share some resources that have added a lot to my understanding of business, startups, and venture capital.  Two points upfront:

  • The Internet (especially YouTube) has become a huge equalizer for startups and small businesses.  Ten years ago, the information that is shared on the channels listed below was very difficult, if not impossible, to come by.  Now it is available to everyone willing to learn, and don’t write off YouTube as a learning tool.  The first channel I recommend below is the entire semester for a Stanford computer science course.
  • At first blush, it may seem that the channels are focused on tech startups, but the lessons and general business discussions are great for any business owner running any type of company, in any industry.

So here are five YouTube channels I recommend every employer/entrepreneur should follow:

1.     How to start a startup by Stanford school of computer science

Sam Altman, the President of Y Combinator, conducted this class for Stanford’s computer science school.  He brought in some of the preeminent investors and entrepreneurs of Silicon Valley as guest lecturers for the class.  All 20 lecturers are on YouTube, so no need to be a student at Stanford.  I’ve watch all of the lectures, but some of the best ones that are definitely worth the time to watch are:

Lecture 15 – How to manage by Ben Horowitz (I’ve written about this lecture previously here)

Lecture 3 – Before the startup by Paul Graham

 2.     Gary Vaynerchuk

I have to be honest, I did not like Gary Vaynerchuk when I first came across him a few years ago while he was growing his wine business into a $60 million business.  However, his Ask Gary Vee Show has been very insightful for social media marketing.  He has recognized recently that his persona may turn a few people off, but he has taken steps to regulate it a bit more.  However, as he regularly professes, everyone needs to be their true self, and he does not hide who he is.  I have to admit that I thought social media was not for me, or for lawyers for that matter, but as Gary points out that social is part of marketing now, and every business must engage in social.  Another major takeaway I learned from him, it does not hurt to try new social media platforms and learn how they work, there is simply no downside to trying and learning.

3.     Stanford Graduate School of Business

Stanford’s School of Business places great content in shorter segments (less than 10 minutes) on a wide range of business topics.  The videos are produced with regular consistency, and cover a wide range of topics.  Recently, one video discusses Human Resources issues that face a startup – posted below.  Consider this channel your continuing business education.

 

4.     Foundation by Kevin Rose

Foundation is a series of interviews of entrepreneurs by Kevin in an informal setting.  The first 15 or so interviews are must watches.  For entrepreneurs, it is great to hear the stories of successful entrepreneurs and the struggles they had.  For business owners, the series provides insights into how these individuals started, managed, and grew their businesses.

5.     Bothsides TV – Mark Suster

Mark Suster is a venture capitalist at Upfront Ventures in Pasadena.  He interviews guests about startup issues and investing with a focus on technology.  His blog, Both Sides of The Table is also a good read for anyone interested in venture capital, and the Los Angeles tech scene.

Bonus: California Employment Law Report

Also, I have to add my YouTube channel to the list as well.  If you have any questions or topics you would like to have me cover in a video, please reach out to me on Twitter at @anthonyzaller or email me.

This week, a federal court in northern California certified portions of a class action Picture - driverbrought by Uber drivers who worked in California since 2009 (click here for the decision [PDF]).  Over 160,000 drivers have worked for Uber in California during this time period, and while the case is making a lot of news, what are the key issues employers should understand about the ruling?  Here are five takeaways for employers from the decision:

1.     Employers must understand the class action procedure

Employers with more than 30 or so employees should understand what a class action is, and the procedural issues of a class action.  It is important to understand that while the court certified certain portions of the plaintiffs’ case (and refused to certify others), this does not mean that Uber has lost the case.  Class certification is not a ruling on the merits of the case, but only whether the case is one that there a sufficient similarities between all of the class members’ claims that enable to court to decide the matter on a class wide basis.  The court explained:

The merits of the case are not currently at issue. Rather, the Court needs to consider only two questions at this juncture; whether the case can properly proceed as a class action, and, if so, how. While answering both of those questions necessarily requires the Court to perform a rigorous analysis of a number of legal issues, the parties correctly recognize that one threshold issue is of paramount importance to the success or failure of Plaintiffs’ class certification motion: as to whether drivers are Uber’s employees or independent contractors under California’s common-law test of employment, will “questions of law or fact common to class members predominate over any questions affecting only individual members” of the proposed class?

….

That is, are the drivers’ working relationships with Uber sufficiently similar so that a jury can resolve the Plaintiffs’ legal claims all at once? This question is of cardinal importance because if the Plaintiffs’ worker classification cannot be adjudicated on a classwide basis, then it necessarily follows that Plaintiffs’ actual substantive claims for expense reimbursement and conversion of gratuities cannot be adjudicated on a classwide basis either.

The court ruled in plaintiffs favor in certifying the class action because Uber treated all of the drivers the same:

As other courts weighing certification of employment misclassification claims have recognized, however, there is inherent tension between this argument and Uber’s position on the merits: on one hand, Uber argues that it has properly classified every single driver as an independent contractor; on the other, Uber argues that individual issues with respect to each driver’s “unique” relationship with Uber so predominate that this Court (unlike, apparently, Uber itself) cannot make a classwide determination of its drivers’ proper job classification.

Uber also made the argument that the class should not be certified because many drivers did not support the lawsuit, as demonstrated in 400 declarations it offered from the drivers.  The court noted that class member’s opposition to the class action does not necessarily bar class certification.  The court explained that it “must be mindful” of the fact that “‘the protections conferred by [these laws] have a public purpose beyond the private interests of the workers themselves.’”  In addition, the court explained that if class members do not agree with the class action, they are free to opt-out of the class action.

2.     The Borello test determines if workers are properly classified as independent contractors

The “most significant consideration” is the putative employer’s “right to control work details.”  S.G. Borello & Sons, Inc. v. Dep’t of Indus. Relations (Borello), 48 Cal. 3d 341, 350 (1989).  Recently, the California Supreme Court noted that under the right-of-control test, it is “not how much control a hirer [actually] exercises, but how much control the hirer retains the right to exercise.” Ayala, 59 Cal. 4th at 533.

The second set of factors that the court will look at under the Borello test are as follows:

a) whether the one performing services is engaged in a distinct occupation or business;

(b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

(c) the skill required in the particular occupation;

(d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;

(e) the length of time for which the services are to be performed;

(f) the method of payment, whether by the time or by the job;

(g) whether or not the work is a part of the regular business of the principal; and

(h) whether or not the parties believe they are creating the relationship of employer-employee.

Finally, the Borello test has five additional factors borrowed from the Fair Labor Standards Act (FLSA) in making a determination of a worker’s classification:

(i) the alleged employee’s opportunity for profit or loss depending on his managerial skill;

(j) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers;

(k) whether the service rendered requires a special skill;

(l) the degree of permanence of the working relationship; and

(m) whether the service rendered is an integral part of the alleged employer’s business.

The court analyzed these factors and held that a class action was appropriate in this case “because all (or nearly all) of the individual elements of the Borello test themselves raise common questions which will have common answers.”

3.     It is the employer’s burden to prove the workers are independent contractors, so proceed with caution

The court noted that because Uber drivers “’render service to Uber,’ they are presumptively employees as a matter of law.  Thus, the Plaintiffs have proved their prima facie case, although the ultimate question of their employment status will need to be decided by a jury.  Therefore, the burden will be on Uber at trial to ‘disprove an employment relationship.’”

4.     Understand obligations to reimburse employees for work related expenses

The plaintiffs were also seeking to certify a class of drivers who incurred business expenses and were seeking reimbursement for these expenses under Labor Code section 2802.  While plaintiffs were not entirely clear on what items they were seeking reimbursement for, the court concluded that it appeared the main reimbursement items were for vehicle operating expenses, such as gas, maintenance, and wear and tear.  Plaintiffs, therefore, waived reimbursement claims for other items such as water, gum, and mints for passengers, and clothing costs.  I’ve written previously about employer’s obligations to reimburse drivers for mileage here.

The court noted that these reimbursement claims “can sometimes be problematic to certify as class actions because ‘there may be substantial variance as to what kind of expenses were even incurred by [the workers] in the first place” and “it may be challenging to determine on a classwide basis whether a particular expense (or type of expense) was ‘necessary’ or incurred in ‘direct consequence’ of the employee’s duties.”  The court held that it would not certify the reimbursement class at this point in time because the plaintiffs did not demonstrate that by dropping the reimbursement claims in addition to the mileage reimbursement claim was in the best interest of the class.

5.     Businesses need to be careful about how they characterize tips or service charges to customers, and understand the difference

Plaintiffs also assert that because the drivers should have been classified as employees, Uber violated Labor Code section 351, which precludes employers from taking employee’s tips.  The court granted plaintiffs’ motion for class certification on this issue based on Plaintiffs’ evidence that Uber informed its customers in advertisements that a tip for the driver was included in the cost of the fares (“When the ride is over, Uber will automatically charge your credit card on file.  No cash is necessary.  Please thank your driver, but tip is already included”; “All Uber fares include the tip….”)  Employers must be mindful about how they characterize tips and service charges, and must understand the difference between the two under the law.


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I was able to catch up with California Restaurant Association’s CEO, Jot Condie at the 2015 Western Foodservice & Hospitality Expo.  We discuss the threats facing restaurateurs and the steps the CRA is taking to represent its members.

 

This Friday’s Five covers five employment law developments that occurred in August 2015 that will have an impact for employers in California.

1)     NLRB ruling widens which companies may be considered “joint employers”

In a 3-2 decision, the NLRB ruled that Browning-Ferris Industries of California, Inc. was a joint employer with a staffing agency, Leadpoint Business Services, and therefore the employees of Leadpoint have bargaining rights with Browning-Ferris Industries.

The NLRB’s opinion stated that given the increase in employment placement agencies and temporary help services projected to be employing as many as 4 million employees by 2022, it “is reason enough to revisit the Board’s current joint-employer standard.”

The NLRB set forth this new standard:

 Under this standard, the Board may find that two or more statutory employers are joint employers of the same statutory employees if they “share or codetermine those matters governing the essential terms and conditions of employment.”  In determining whether a putative joint employer meets this standard, the initial inquiry is whether there is a common-law employment relationship with the employees in question. If this common-law employment relationship exists, the inquiry then turns to whether the putative joint employer possesses sufficient control over employees’ essential terms and conditions of employment to permit meaningful collective bargaining.

The NLRB also explained that the mere ability to control employees, even if never actually used in the workplace, would still be sufficient to establish a joint employment relationship:

 We will no longer require that a joint employer not only possess the authority to control employees’ terms and conditions of employment, but also exercise that authority. Reserved authority to control terms and conditions of employment, even if not exercised, is clearly relevant to the joint-employment inquiry.

This ruling will likely be appealed to the courts for review.  However, the ruling could have an impact upon employers who don’t have union workers, as the NLRB decisions are often times relied upon by courts as persuasive authority.

2)     Minimum wage increase stalls in state legislature

As written about previously, a bill, SB 3 proposed increasing California’s minimum wage to $11 per hour on January 1, 2016 and then again to $13 per hour by July 1, 2017.  Then beginning on January 1, 2019, the minimum wage would have been indexed to inflation and would be adjusted upward every year afterwards.  The bill was held in committee by the Assembly Committee on Appropriations this week, and will not likely make it out of the Committee this year.

3)     California Supreme Court addresses arbitration agreements and what makes such agreements “unconscionable” and therefore unenforceable

In a consumer case, the California Supreme Court ruled in Sanchez v. Valencia Holding Company that an arbitration agreement that contained a class action waiver was not unconscionable, and therefore enforceable.  The Court explained that the “unconscionability doctrine ensure that contracts, particularly contracts of adhesion, do not impose terms that have been described as …’so one-sided as to ‘shock the conscience’”.  The Court noted that because unconscionability is a contract defense, the party asserting the defense bears the burden of proof.  The Court ultimately held that plaintiff could not meet this burden in establishing that the arbitration agreement was unconscionable, and therefore could not proceed as a class action.  Even though this case was in the consumer context, the ruling will apply to the enforcement of arbitration agreements with class action waivers in the employment context as well.

4)     Bill precluding mandatory arbitration agreements passes legislature and sent to the Governor for his consideration

Speaking of arbitration agreements, AB 465 is a bill that prohibits employers from utilizing mandatory arbitration agreements was passed by the legislature this week.  Now it is up to Governor as to whether the  bill becomes law.  The bill prohibits “any person from requiring another person, as a condition of employment, to agree to the waiver of any legal right, penalty, forum, or procedure for any employment law violations.”  The bill also shifts the burden of proof onto the employer enforcing the waiver to show that the waiver was “knowing and voluntary.”  Violation of these provisions carry a penalty of $10,000 per violation plus attorney’s fees to the prevailing employee.

5)     Studios fail to have antitrust class action dismissed, which alleges the studios engaged in a conspiracy to fix employee compensation and restrict mobility

Case sounds familiar, right?  As the court noticed in its opinion the case is very similar to the High-Tech Employee Antitrust class actions alleging Adobe, Apple, Google, Intel, Intuit, Pixar, Lucasfils and eBay, alleging the companies had “no cold call” agreements to limit the requiring of high tech workers.  This made Steve Jobs’ email response back to Eric Schmidt infamous, which only consisted of a smiley face when he was told that the recruiter who violated the no call rule was terminated.

In this case, the plaintiffs allege that Blue Sky Studios, DremWorks Animation SKG, ImageMovers Digital, Lucasfilm, Pixar, Sony, and Disney all had a scheme not to actively solicit each other employees and that the studios engaged in “collusive discussions in which they exchanged competitively sensitive compensation information and agreed upon compensation ranges,” that would keep the salaries artificially low in the industry.  The court denied defendants’ motion to dismiss, permitting plaintiffs to litigate the case.

This Friday’s Five discusses five issues California employers should remember about whether they may require credit checks from applicants or employees.  And if employers can obtain the information, what additional considerations they should take into account when using this information for employment decisions and privacy concerns.

1.      Credit checks are different than background checks.

Since January 1, 2012, Labor Code section 1024.5 restricts which positions employers can require credit checks.  It is important to note that credit reports or credit checks are different than background checks.  The law defines “consumer credit report” as “any written, oral, or other communication of any information by a consumer credit reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity, which is used or is expected to be used, or collected in whole or in part, for the purpose of serving as a factor in establishing the consumer’s eligibility for: … (2) employment purposes….” See Civil Code section 1785.3(c).  It is important for employers to understand the difference between obtaining a credit report versus a more general background check.

2.      California employers can only preform credit checks for a limited number of positions.

Employers are only permitted to obtain consumer credit reports for applicants/employees who meet one of the following categories:

  • A managerial position (defined as an employee who meets the executive exemption set forth in the Industrial Welfare Commission’s Wage Orders).
  • A position in the state Department of Justice.
  • That of a sworn peace officer or other law enforcement position.
  • A position for which the information contained in the report is required by law to be disclosed or obtained.
  • A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: (A) Bank or credit card account information. (B) Social security number. (C) Date of birth.
  • A position in which the person is, or would be, any of the following: (A) A named signatory on the bank or credit card account of the employer. (B) Authorized to transfer money on behalf of the employer. (C) Authorized to enter into financial contracts on behalf of the employer.
  • A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
  • A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.

 3.      If employers can conduct a credit check, employers must notify employees of certain information.

The law requires that the employer provide the following information to the applicant/employee prior to obtaining a consumer credit report:

 The notice shall inform the person that a report will be used, and shall identify the specific basis under subdivision (a) of Section 1024.5 of the Labor Code for use of the report. The notice shall also inform the person of the source of the report, and shall contain a box that the person may check off to receive a copy of the credit report. If the consumer indicates that he or she wishes to receive a copy of the report, the user shall request that a copy be provided to the person when the user requests its copy from the credit reporting agency. The report to the user and to the subject person shall be provided contemporaneously and at no charge to the subject person.

 4.      If the position is denied based upon the applicant’s/employee’s credit information, the employer must provide an additional notification.

The law requires that if an applicant/employee is denied employment “either wholly or partly” because of information obtained in a consumer credit report, the employer must provide the following information:

 Whenever employment involving a consumer is denied either wholly or partly because of information contained in a consumer credit report from a consumer credit reporting agency, the user of the consumer credit report shall so advise the consumer against whom the adverse action has been taken and supply the name and address or addresses of the consumer credit reporting agency making the report. No person shall be held liable for any violation of this section if he or she shows by a preponderance of the evidence that, at the time of the alleged violation, he or she maintained reasonable procedures to assure compliance with this section.

 5.      Employers must keep all financial information confidential. 

Disclosure of credit information obtained for an applicant or employee would be a violation of the individual’s right of privacy.  Therefore, employers must take steps to safeguard this information and ensure that only employees who have a need to know have access to the information, and that these employees understand that it is confidential information that cannot be shared even with other employees in the company that do not have a reason to know the information.

Speaking with some clients, I sense their overwhelming confusion in setting up employment policies in California. While it can be a daunting task, I remind them that the key is to approach it in a systematic process, and once the system is in place, compliance can be very easy. While there are many issues employers need to review on an ongoing basis, there are five that are a good starting point:

 1)  Meal and rest breaks

Yes, California employers are still being sued for meal and rest break violations. This should be a primary concern for all California employers, and simply part of standard operating procedures by now.

 2)  New hire process and packets

Employers should review their hiring process, including:

3)  Paid sick leave compliance

As of July 1, 2015, employers must allow employees to accrue paid sick leave under California law. I’ve written about the law, as well as the amendment to clarify the law signed by Governor Brown on July 13, 2015.

The DIR provides a great resources page every employer should review.

 4)  Exempt vs. non-exempt employee classifications

5)  Uncompensated work-time

Employers need to be careful and have policies in place to address claims from employees that they were not paid for all time worked. These claims can take many different forms:

  • Travel time may have to be paid
  • Off-the-clock work
  • On-call time
  • Pre-shift or post-shift work. In 2014, Amazon workers sued their staffing company claiming that the post-shift security check employees had to undergo should have been compensated work-time. The U.S. Supreme Court ruled in the staffing company’s favor, but nevertheless, it was a costly case for the company and required protracted litigation.

 

Even though employers allow employees to watch TV, surf the Internet, or even sleep, depending on the circumstances such on-call time, even if the employee is not doing any work, still may be required to be paid by the employer.  It has been clear since the 1940’s that employers have the obligation to pay employees when the employer requires the employee’s “readiness to serve”:

Of course an employer, if he chooses, may hire a man to do nothing, or to do nothing but to wait for something to happen. Refraining from other activity is often a factor of instant readiness to serve, and idleness plays a part in all employments in a stand-by capacity. Readiness to serve may be hired, quite as much as service itself, and time spent lying in wait for threats to the safety of the employer’s property may be treated by the parties as a benefit to the employer. Whether time is spent predominantly for the employer’s benefit or for the employee’s is a question dependent upon all the circumstances of the case.

Armour & Co. v. Wantock (1944) 323 U.S. 126, 133. Most of California Wage Orders define “hours worked” as “the time during Security Guard Sleeping2which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” Wage Order 9, subd. 2(H). As explained in Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 582, “[T]he two phrases – ‘time during which an employee is subject to the control of an employer’ and ‘time the employee is suffered or permitted to work, whether or not required to do so’ – can also be interpreted as independent factors, each of which defines whether certain time is compensable as ‘hours worked.’ Thus, an employee who is subject to an employer’s control does not have to be working during that time to be compensated under [the applicable] Wage Order.”

Courts have looked at various factors to evaluate the level of control over employees in determining whether on-call time needs to be paid by the employer: (1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time. See Mendiola v. CPS Sec. Solutions, Inc. (2015) 60 Cal 4th 833, 841. In addition, Courts also “take[] into account whether the ‘[o]n-call waiting time…is spent primarily for the benefit of the employer and its business.” Mendiola at 841 (citing Gomez v. Lincare, Inc. (2009) 173 Cal.App.4th 508).

In Mendiola v. CPS Sec. Solutions, Inc., security guards resided at the employer’s trailers located on construction sites they were responsible for patrolling. They were obligated to respond immediately in uniform when contacted by a dispatcher or became aware of suspicious activity. If guards left the property, they had to report where they were going, and could not be more than 30 minutes away from the site. In addition, the employer placed restrictions on the guards’ living conditions in the employer-provided trailers, and the employees could not have visitors, pets, or consume alcohol. Mendiola at 841. In addition, the California Supreme Court held that the guards’ “mere presence” was integral to CPS’s business, as “the idea that construction sites should have an active security presence during the morning and evening hours.” Id. at 841-42. Given these facts, the Supreme Court held that the security guards’ on-call hours constituted compensable hours worked and, further, that defendant could not exclude “sleep time” from plaintiff’s 24-hour shifts. Id. at 838.  Therefore, employers should consider the following five issues:

  1. Review the overall control over the employee while they are on-call.
  2. Review the geographic restriction on the employee’s movement.
  3. Is the employee’s presence or quick response integral to the business?
  4. Review the frequency that the employee is call while on standby.
  5. Analyze if other factors establish control over the employee while on-call, such as the requirement that the employee respond in uniform or drive a company car when responding to a call.

It is important for employers to carefully review the total circumstances surrounding employees who are on-call. The penalties can be astounding, and as Mendiola established, employees on-call who are even sleeping may still be entitled to pay.

Photo courtesy of Satish Krishnamurthy