I’ve had a lot of interest from clients lately about the details of the administrative hearing process that employees can pursue before the California Labor Commissioner. With this interest, and just having represented a client at a Berman hearing this week, I wanted to explain the process in a series of posts. 

An employee seeking recovery of unpaid wages has two options to pursue recovery: (1) file a civil lawsuit or (2) file a wage claim with the California Labor Commissioner under Labor Code section 98 et. seq. If the employee pursues her rights through the Labor Commissioner, the Commissioner will send notice to the employer regarding a settlement conference. This settlement conference is an informal conference during which a Deputy Labor Commissioner attempts to settle the case. Both parties may present their arguments, but the Deputy Labor Commissioner does not issue a ruling or decide any issues at this settlement conference.

If the settlement conference does not result in a settlement, the case will be set for an administrative hearing, known as a Berman hearing, pursuant to Labor Code section 98(a). During the Berman hearing, both parties can present their cases through testimony, witnesses, and documents. The hearings are basically mini-trials, but the formal rules of evidence do not apply. Moreover, parties do not need to be represented by a lawyer, but lawyers are regularly present to assist in presenting the evidence. The parties’ and witnesses’ testimony is under the penalty of perjury and the deputy labor commissioner records the hearing, and this audio recording can be obtained by the parties at a later date. The Deputy Labor Commissioner is supposed to issue an order, decision, or award setting forth the rational for his or her decision within 15 days of the Berman hearing. However, it has been my experience that the order, decision, or award is not usually issued in this time period given the drastic cuts in budgets and the huge workload facing the Labor Commissioner.

The Labor Commissioner’s award is binding on both parties, and is an enforceable judgment in Superior Court. The award, however, may be appealed to Superior Court by either party. 

All too common is the assumption that because a company’s policies comply with Federal law, and perhaps other states’ laws, the policy should be fine under California law. This wrong assumption is clearly illustrated by a recent study by Expedia that estimates employees forfeit $34.3 billion in unused vacation time across the U.S. From what I’ve read, I do not see any adjustment in the study for the fact that such use-it-or-lose-it vacation policies are illegal under California law.

California law is clear that while paid vacations are not required, if a California employer provides for paid vacations, these benefits are considered wages and are earned by the employee on a pro rata basis for each day of work. Moreover, because vacation is a form of deferred wages and vests as it is earned, vacation wages cannot be forfeited – so no "use-it-or-lose-it" policies. An employer can place a reasonable cap on vacation benefits that prevents an employee from earning vacation over a certain amount of hours, and the Division of Labor Standards Enforcement has opined that a cap that allows at least nine months for the employee to use the vacation after the vacation was earned is a reasonable cap. See DSLE Enforcement Policies and Interpretations Manual section 15.1.4.1. Moreover, Labor Code section 227.3 requires that when an employment relationship ends all vacation earned but not yet taken by the employee must be paid at the time of termination.

The Wall Street Journal is reporting about the plans of Silicon Valley entrepreneurs who would like to anchor a ship 12 miles off the San Francisco coast in order to skirt U.S. Immigration laws. They project that the ships could hold 1,000 people at a cost for a room roughly equivalent (if not cheaper) to an apartment in San Francisco. The entrepreneurs view this as a viable option for tech start-ups to have access to skilled workers, who are having a difficult time obtaining H1-B visas to live and work in the U.S. Since it is simpler to obtain a B-1 visa that permits the worker to travel to the U.S. for meetings, seminars, and training, the ship would act as a staging area for the workers outside of the U.S., but still allow them to work in close proximity to the start-up company. The article mentions that the legal ramifications of immigration law may not permit this, but it made me wonder if the employer would effectively not have to comply with the California Labor Code as well. 

I believe it would be hard for the California Courts to establish that the Labor Code would apply to the workers stationed in a ship outside of the U.S. boarders for work completed outside of the state. Recently, the California Supreme Court held in Sullivan v. Oracle Corporation that California Corporations that employ non-resident workers in the state of California are subject to California’s Labor Code provisions, such as requirements for overtime pay which are vastly different than other states’ law and federal law (click here for a more detailed analysis of the Oracle decision). The Court in Oracle explained that states have broad authority under their police powers to regulate employment matters within their boundaries (such as child labor laws, minimum and other wage laws, and workers compensation laws). The Court stated, “To exclude nonresidents from the overtime laws’ protection would tend to defeat their purpose by encouraging employers to import unprotected workers from other states.”

However, that case was limited to work performed in California. The scenario proposed by the Silicon Valley entrepreneurs is vastly different, where non-citizens perform work outside of the U.S. and California boarders, and only travel into the State for meetings. It is analogous to the situation where employees living in China, but working for a California corporation, routinely travel to California for work.  Under Oracle, the argument could be made that the employees may have to be paid according to California law for the work done while in California, but it is unlikely this requirement would extend to the work done outside the state while on the ship.  These types of issues will be more and more common given how technology is changing the traditional concepts that workers have to be in a certain building, or even country, while performing work. 

 

 

Governor Brown signed a number of new employment laws that take effect in January 2012.  During this webinar, we will cover the new obligations facing employers under these recently enacted employment laws as well as the proper steps employers should take to comply with them.  The discussion will also cover the recent oral argument in Brinker Restaurant Corp. v. Superior Court and what steps employers should take while waiting for the Supreme Court’s ruling.

Other topics will include:

  • New laws effective January 2012, including:
    • Statute increasing the penalties for employers who misclassify independent contractors
    • What the Wage Theft Protection Act of 2011 means for employers
    • Gender identity and expression
    • Prohibiting e-verify requirements under the Employment Acceleration Act of 2011.
    • New requirement to provide health benefits during pregnancy disability leave
  • Review of new developments that took place in 2011:
    • Development of case law upholding class action waivers in arbitration agreements
    • Payment requirements for non-resident employees working in California

The cost is $150 per connection (no fee for existing clients).  Click here for more information and to register. 

 

What can I say, technology is awesome.  The oral arguments in Brinker v. Superior Court that took place on November 8 are already on Youtube:

https://youtube.com/watch?v=IJBnSaUt0_M%3Frel%3D0

The Supreme Court has 90 days from oral argument to issue its decision.

I had the pleasure of serving on a jury here in Los Angeles this month. It was a criminal case that lasted about one week. From a litigator’s perspective, the service was very interesting, and very informative. Here are a few lessons I picked up from my jury service:

  1. Lawyers need to keep their cases short, sweet, and interesting. Our case did involve some science, and the lawyers lost some of the jurors. At one point, a jury actually went to sleep and started to snore. Whose fault was this? The lawyers, and in no way to I fault the other juror because I was feeling the same way. Courtrooms are very drab places without windows. Add a lunch to the equation, and there is no doubt that jurors would rather be taking a nap than hearing an expert try to explain the science behind blood alcohol content for a third time.
  2. The jurors were very attune to credibility issues. I thought that I was the only one to notice some credibility issues with certain witnesses given my litigation experience. However, during deliberations almost every other juror picked up on the same cues I did in determining who was telling the truth.
  3. It still is a chance to leave your case up to the jury. You never know what evidence a jury will find persuasive.
  4. I have a new found respect for the system. I was very impressed with the sense of obligation the other jurors felt towards doing what was right in the case. Everyone listened to the Judge’s instructions and did their best to reach an impartial conclusion.
  5. Don’t avoid jury service. I hear it all of the time, “Our legal system is broken, something must be done to fix it.” Our Founding Fathers ensured that we always had a way to fix a broken system, and that is why they wanted a jury of one’s peers to resolve disputes. It is a great way to keep a check on the government overzealously prosecuting citizens or a way to make sure a frivolous lawsuit in civil court ends in the best way possible. In addition, if you are selected to serve on a jury, it is actually very interesting to see the case play out, what other jurors found persuasive as evidence, and to reach a conclusion with your fellow jurors.

Over the weekend, Governor Brown signed S.B. 459 into law (among other employment bills) which makes employers liable for civil penalties of $5,000 to $15,000 for each violation of “willful misclassification” of employees as independent contractors. In addition, if it is found that the employer has a pattern and practice of misclassifying independent contractors, the penalties can increase to a minimum of $10,000 to $25,000 per violation. The new law adds Sections 226.8 and 2753 to the Labor Code.

The new law imposes the penalties for a “willful misclassification,” which is defined as:

“Willful misclassification” means avoiding employee status for an individual by voluntarily and knowingly misclassifying that individual as an independent contractor.

Click here to read more information about the factors considered in determining whether a worker qualifies as an independent contractor and other areas of liability employers face in addition to this new law.

Internet Posting

In addition to the substantial civil penalties, employers who violate the law are also required to post a notice on their website, or if the employer does not have a website they must post it in an area available to employees and the general public, for one year about the violation. The notice must contain the following information:

(1) That the Labor and Workforce Development Agency or a court, as applicable, has found that the person or employer has committed a serious violation of the law by engaging in the willful misclassification of employees.
(2) That the person or employer has changed its business practices in order to avoid committing further violations of this section.
(3) That any employee who believes that he or she is being misclassified as an independent contractor may contact the Labor and Workforce Development Agency. The notice shall include the mailing address, e-mail address, and telephone number of the agency.
(4) That the notice is being posted pursuant to a state order.

The law gives the Labor Commissioner the power the collect the civil penalties. There is also an argument that individual litigants may recover a portion of the civil penalties by bringing a Private Attorneys General Act (PAGA) claim. However, PAGA was not amended to specifically deal with the new labor code sections created by the new law, so there will undoubtedly be litigation over the extent the new law is actionable under PAGA, or the legislature may amend PAGA to clarify this issue.

The intent of the legislature is clear by passing this law – it does not want independent contractors to be used in California.  Employers must therefore be very careful in conducting the analysis of whether employees are properly classified as independent contractors.

Today, the California Supreme Court set oral argument in Brinker Restaurant v. Superior Court (Hohnbaum) to take place on November 8, 2011. The Court typically provides a ruling on cases within 90 days of oral argument, so I expect a ruling very early in 2012.

This case is the much anticipated ruling on whether employers need to “ensure” meal breaks or merely make the breaks available to employees.  The Supreme Court explains, "This case presents issues concerning the proper interpretation of California’s statutes and regulations governing an employer’s duty to provide meal and rest breaks to hourly workers."   Click here for a detailed analysis of the lower court’s ruling and the different issues that the Supreme Court may address.

The Supreme Court has issued "grant and hold" order pending the ruling in Brinker for the following cases and the Brinker decision will likely determine the issues in these cases as well:

S168806 BRINKLEY v. PUBLIC STORAGE
S184995 FAULKINBURY v. BOYD & ASSOCIATES
S186357 BROOKLER v. RADIOSHACK CORPORATION
S188755 HERNANDEZ v. CHIPOTLE MEXICAN GRILL
S191756 TIEN v. TENET HEALTHCARE
S194064 LAMPS PLUS OVERTIME CASES
S195866 SANTOS v. VITAS HEALTHCARE

I will continue to provide case updates routinely as the decision nears.

LexisNexis Labor & Employment Law Community 2011 Top 50 Blogs

Thanks for the readers of the California Employment Law Report for their support in being named a top 25 employment law blog in 2011 by LexisNexis.

With all of the different social media available today, it is hard to decide what to focus on. However, as I’ve said before, I think blogging can really assist a lawyer in keeping current with the law, and helping the general public to have a better understanding as well.  Plus, my blogging has lead to meeting some great people – the highlight this year was my interview with Guy Kawasaki.  Looking forward to meeting many more. 

Thanks for reading. I will be rolling out a new idea in the next month I’ve been working on for some time now that should be an interest for readers. Check back soon. Thanks for the support.
 

It is not often that the California Employment Law Report can opine outside of the boundaries of the state of California, but I am going out on a limb on this one. I came across what I would recommend to every employer as a way to reduce litigation. In the book, End Malaria, a new book published by the Domino Project, the chapter, Three Words From Ann Landers, written by Scott Stratten of UnMarketing, has the following recommendation:

Take these three words that Ann Landers recommended as a test and try them with your team for one day (I dare you):

Good.True.Helpful.

If what you’re about to say or email to someone doesn’t meet two out of those three criteria, reword it or don’t say it at all.

Instead of saying “Late again, eh?” you can say “Mike, you’re a valuable member of this team, and when you’re late it hold up everyone’s progress. What can I do to help you?

Scott says that people using his recommendation don’t even need to use all three criteria – just two. Companies spend so much time thinking about what type of messages they send their customers through marketing and sales campaigns, but do they spend even 10% of that effort into thinking about how to communicate with its own employees? Give it a try, and I bet the payoff will show up in higher employee retention, higher morale, and less lawsuits.