The DOL is offering a couple of webcasts to discuss employers’ and third parties’ obligations under the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA provides for COBRA premium reductions and additional election opportunities for continuation coverage. The webcasts are an effort to assist employers in complying with the new requirements.

The presentation available from the DOL’s site is about 2 hours long. I have not yet listened to the webcast, so I cannot recommend whether or not it is informative, but the price is right – free. Below are the PowerPoint slides used during the presentation:

COBRA Provisions Under Arra http://static.slidesharecdn.com/swf/ssplayer2.swf?doc=dolcobraprovisionsunderarra-090406172133-phpapp02&stripped_title=cobra-provisions-under-arra

Anyone interested in listening to the webcast presented on March 24, 2009 can click here. The registration is fairly simple, but you will need RealPlayer on your computer (click here to download a free version).

Here are some other related links employers may find helpful:

Fact Sheet on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html

Model Notices
http://www.dol.gov/ebsa/COBRAmodelnotice.html

Department of Labor (DOL) FAQs on Premium Reduction Under ARRA
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html

Internal Revenue Service (IRS) FAQs on Premium Reduction Under ARRA
http://www.irs.gov/newsroom/article/0,,id=204708,00.html

Form 941
http://www.irs.gov/pub/irs-pdf/f941.pdf

Form 941 Instructions
http://www.irs.gov/pub/irs-pdf/i941.pdf

DOL COBRA Web page
www.dol.gov/COBRA

IRS COBRA Web page
http://www.irs.gov/newsroom/article/0,,id=204505,00.html
 

In addition to wrongful termination claims brought by terminated employees, employers also face an additional cause of action for slander.  In a recent appellate decision, The Nethercutt Collection v. Regalia, the Plaintiff was terminated from his employment at a classic car museum. Regalia asserted causes of action for wrongful termination in violation of public policy, tortious interference with contract and advantageous business relations and opportunities, and slander. Regalia’s tortuous interference claim was dismissed prior to trial, and the jury rejected his wrongful termination claim. The jury found that Regalia had suffered no noneconomic damages, but still awarded him $750,000 in damages for harm to his reputation for statements made by Defendants about Regalia after he was terminated. Defendants appealed the jury’s finding.

Slander

The trial court focused on two statements made by the employer in this case for Regalia’s slander claim. The first statement made by the employer was that Regalia demanded a finder’s fee for assisting the museum in acquiring a classic Talbot-Lago car worth $2.3 million, and that Regalia was not entitled to the fee. Second, the employer stated that other employees would not work for Regalia and would leave if he had remained employed.

Civil Code section 46 provides:

Slander is a false and unprivileged publication, orally uttered, and also communications by radio or any mechanical or other means which: 1. Charges any person with crime, or with having been indicted, convicted, or punished for crime; 2. Imputes in him the present existence of an infectious, contagious, or loathsome disease; 3. Tends directly to injure him in respect to his office, profession, trade or business, either by imputing to him general disqualification in those respects which the office or other occupation peculiarly requires, or by imputing something with reference to his office, profession, trade, or business that has a natural tendency to lessen its profits; 4. Imputes to him impotence or a want of chastity; or 5. Which, by natural consequence, causes actual damage.

A slander that falls within the first four subdivisions of Civil Code section 46 is slander per se and require no proof of actual damages. A Slander that does not fit into those four subdivisions is slander per quod, and special damages are required for there to be any recovery for that slander.

The appellate court rejected Regalia’s argument that the two statements at issue in the case are slander per se:

A person can make a claim for money that is rejected as not being justified, and still not be viewed as having committed an act that reflects negatively on that person. Thus a statement about such a claim does not necessarily “directly injure him in his profession, trade or business” (Correia v. Santos, supra, 191 Cal.App.2d at p. 852) so as to fit within subdivision (3) of Civil Code section 46. (See Gang v. Hughes (9th Cir. 1954) 218 F.2d 432 [alleged statements that a plaintiff’s attorney refused to settle a case until he was paid and that he was paid because he demanded immediate payment not slander or libel per se].) Likewise, the statement that Regalia was fired because other employees would not work for him and would leave if he remained employed does not, on its face, clearly fall within subdivision (3) of Civil Code section 46. That one or more employees do not want to work for someone, without more, again, does not necessarily reflect adversely on the person. The employee or employees might not want to work for a person because of the person’s work ethic or rectitude, or legitimate business policies. Those statements may by “natural consequence” cause plaintiff actual damages. (Civ. Code, § 46, subd. (5).) But that makes them slander per quod and requires proof of actual damages.

Therefore, the appellate court overturned the trial court because the jury specifically found that Regalia did not suffer actual damages.

Even though the employer succeeded in this case, it presents a good reminder to employers to be careful in communications to others about the reasons why certain employees were terminated. The best approach is to not discuss the reasons for an employee’s termination with any employees in the organization unless they have a need to know.

The case can be viewed from the court’s website for a short period of time in PDF or Word. 
 

The newly appointed Secretary of Labor, Hilda Solis, issued a statement on March 24, 2009 that the Department of Labor is renewing its efforts to enforce labor laws across the country. With the addition of 250 field investigators provided to the DOL under the American Recovery and Reinvestment Act, businesses can be assured of increased audits.

As the Ohio’s Employer’s Blog points out, a DOL audit can feel like an unpleasant medical exam and employers need to be proactive about compliance. Except, I must add, one difference between the medical exam and DOL audit is that you can buy insurance to cover the costs of the medical exam.

In California, employers should review their pay practices, including that employees are paid on time and receive at least the minimum wage for California. For example, employers should insure they are complying with meal and rest break requirements, properly recording meal breaks and the employees’ time worked, properly paying overtime, and reimbursing employees for all business related expenses. Employers employing minors should also carefully examine the child-labor laws applicable to their business, as these requirements are extremely detailed and many well-intentioned employers may still be in violation.

Businesses should also audit whether they have properly classified their exempt employees and independent contractors. A misclassified employee can create a huge amount of liability for a business, as the misclassified employee is entitled to damages for overtime pay, penalties, interest, and their attorney’s fees.

Employers need to be proactive about complying with these complex wage and hour laws. If cost is a concern, complete an in-house audit and then have an attorney double check the policies and practices. It will cost a lot more to contact an attorney after the DOL is in your workplace or the lawsuit has already been filed.

The DOL recently published sample COBRA notices to help plans and individuals comply with the notice requirements set forth in the American Recovery and Reinvestment Act (ARRA) of 2009. 

The DOL explains:

 

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111-5). ARRA includes a requirement that the Secretary of Labor (the Secretary), in consultation with the Secretaries of the Treasury and Health and Human Services, develop model notices. These models are for use by group health plans and other entities that, pursuant to ARRA, must provide notices of the availability of premium reductions and additional election periods for health care continuation coverage. This document announces the availability of the model health care continuation coverage notices required by ARRA.

 

The notices can be found at the Department of Labor’s website here. 

Today is the first time I heard that courts have having problems with jurors using Twitter during trials. Am I surprised?  Not one bit. Is it concerning?  Yes.

The article mentions that most of the messages sent via this form of "microbloging" are innocuous, and are simply jurors saying that they are bored during trials.  There was one case in Philadelphia this week in which the juror twittered that a decision was reached in a high profile case and there would be an "announcement on Monday." 

Jurors are ignoring (or simply not listening to) the Court’s instructions not to discuss the case with anyone. 

Should jury instructions be revised to include a non-twitter policy?

There is discussion now that jury instructions need to be updated to inform jurors that they cannot discuss the facts of the case on the Internet.  I think a judge should probably admonish the jurors about posting anything on the Internet about the case during proceedings is strictly forbidden given how pervasive Web 2.0 has become. As for jurors who think they can get away with this are mistaken, and it still amazes me about how many people seem to forget that everything they do on the Internet is recorded – forever. 

Take away for lawyers:

If you were the attorney presenting when the juror posted that he/she was bored – time to reevaluate your case theme and trial presentation skills. 

Plaintiff, who was a trash truck driver for Athens Disposal Company, Inc., filed a class action against the company alleging violations of the Labor Code.  Plaintiff asserted the following causes of action against Athens:

  1. Failing to pay overtime.
  2. Failing to provide meal periods and to pay an additional hour of compensation per workday to employees who missed a meal period.
  3. Failing to provide rest periods and to pay an additional hour of compensation per workday to employees who missed a rest period.
  4. Failing to provide necessary payroll information to employees and failing to maintain records on each employee showing all hours worked and all meal periods taken.
  5. Civil penalties authorized by the Private Attorneys General Act of 2004 (PAGA) for violating the Labor Code.
  6. Violation of the California Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.).

Immediately after the lawsuit was filed, Athens filed a petition to compel arbitration based on a written agreement with plaintiff. The arbitration agreement contained a provision waiving class arbitrations and also precluded an employee from acting in “a private attorney general capacity,” which would bar plaintiff’s enforcement of the Labor Code on behalf of other employees.

The court held that the entire arbitration agreement was not enforceable:

We conclude that the class arbitration waiver is unconscionable with respect to the alleged violations of the meal and rest period laws given “the modest size of the potential individual recovery, the potential for retaliation against members of the class, [and] the fact that absent members of the class may be ill informed about their rights.” (Gentry v. Superior Court (2007) 42 Cal.4th 443, 463 (Gentry).) In addition, because the arbitration agreement prevents plaintiff from acting as a private attorney general, it conflicts with the Labor Code Private Attorneys General Act of 2004 (PAGA) (§§ 2698–2699.5) — an act that furthers Gentry’s goal of comprehensively enforcing state labor laws through statutory sanctions (see Gentry, supra, 42 Cal.4th at pp. 462–463).

The court noted that the class action waiver in the arbitration agreement by itself was unenforceable, which may have been severed from the arbitration agreement. However, when coupled with the employee’s waiver of action as a private attorney general, the entire agreement was unenforceable.

The case, Franco v. Athens Disposal Company, Inc., can be downloaded for a short period of time from the court’s website in PDF or Word.
 

What does the agreement have to be titled?

I was recently asked if the severance agreement needs to have a specific title in order to be valid. The title does not have to contain specific words, and are usually titled "general release" or "severance agreement." The title, unless it is clearly erroneous or confusing, does not change the type of agreement or the rights the parties are agreement to release. The key here is what the parties are actually releasing in the terms of the document. 

What claims can the parties agree to release?

Release of Unknown Claims

The idea of the severance agreement is to buy some certainty that there will be no litigation following the employee’s separation from the company. The employee (and employer for that matter) can waive all known claims. However, in California, for any party to release unknown claims, the agreement needs to be clear and advise the party that they are releasing unknown claims. Ideally, the agreement should set forth section 1542 of the Civil Code, which states:

A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Release of Age Claims For Older Workers (over 40 years old)

The Older Workers Benefit Protection Act of 1990 (OWBPA) provides workers over 40 years old with additional rights. The OWBPA places additional requirements on employers asking “old” employees to waive their potential claims the Age Discrimination in Employment Act of 1967 (ADEA). Here is a summary of the requirements employers need to meet:

  • The agreement must be written in a manner that the employee can understand.
  • The waiver specifically refers to the employee’s claims or rights under the ADEA.
  • The employee cannot waive claims that have not yet arisen
  • There must be consideration (the employer must give value to the employee which was not already owed to the employee – this has to be present in every severance agreement, not just those releasing age claims)
  • The employee is advised to consult with an attorney
  • The employee is given at least 21 days to consider the agreement (the employer may have to offer up to 45 days – the employer should check with counsel to see if this is necessary); and
  • The agreement may be revoked up to 7 days after it is executed.

Other Provisions To Consider For Severance Agreements

An employer should also consider if the agreement needs to address other issues, such as:

  • Is the release mutual (i.e., the employer and employee are both releasing all claims against each other)?
  • Should there be a non-competition/trade secrets provision?
  • Is the agreement confidential? If so, is there a liquidated damages provision where the parties agree to a certain monetary amount the breaching party will pay?
  • Will the employer provide a reference statement? If so, the language of the statement should be set forth in the agreement.
  • Should there be an arbitration provision to deal with any issues that arise from the severance agreement?
  • Should the employer include a choice of law clause in the agreement that determines which state law will be controlling in the case of a dispute?

 

In Chindarah v. Pick Up Stix, Inc. (February 26, 2009) the court of appeal held that employers may enter into settlement agreements with current and former employees over disputed wage claims. At issue in the case was whether the employer’s settlement and release agreements entered into with individual employees settling disputed overtime wages were valid and enforceable under California law. Thankfully for the thousands of employers in California who have entered into settlement agreements regarding wage and hour claims, the appellate court held the agreements are enforceable.

Two former employees of Pick Up Stix sued for claims for unpaid overtime, penalties and interest due to the misclassification of their jobs as exempt from overtime pay. The employer participated in a mediation, but to no success. Stix then decided to approach the putative class members on its own in an attempt to settlement with them individually. Stix offered the putative class members an amount that the employees would have received under the amount offered by Stix during the mediation. More than two hundred current and former employees accepted the settlement amount and signed a general release. The release acknowledged that the employees had spent more than 50% of their time performing managerial duties and agreed “not to participate in any class action that may include …any of the released Claims….” The release also provided:

In exchange for the release from Employee set forth below, the Company will pay Employee by check the gross amount of [varied amounts] less payroll deductions, in full and complete satisfaction of all issues and claims by Employee for unpaid overtime, penalties, interest and other Labor Code violations for the time period of February 28, 1999 through September 2003.

Plaintiffs challenged the settlement agreements arguing that the agreements were void under Labor Code sections 206 and 206.5.

Labor Code section 206.5 provides:

An employer shall not require the execution of a release of a claim or right on account of wages due, or to become due, or made as an advance on wages to be earned, unless payment of those wages has been made. A release required or executed in violation of the provisions of this section shall be null and void as between the employer and the employee. Violation of the provisions of this section by the employer is be a misdemeanor.

In regards to the waivability of overtime rights, Labor Code section 1194, subdivision (a) provides:

Notwithstanding any agreement to work for a lesser wage, any employee receiving less than the legal minimum wage or the legal overtime compensation applicable to the employee is entitled to recover in a civil action the unpaid balance of the full amount of this minimum wage or overtime compensation, including interest thereon, reasonable attorney’s fees, and costs of suit.

Plaintiffs argued that the release in this case was void as a matter of law to the extent it releases claims for any wages actually due and unpaid and because it constitutes an agreement to work for less than the overtime compensation actually due and unpaid. The court rejected Plaintiffs’ argument:

The Plaintiffs claim “wages actually due and unpaid” means wages that are disputed, if they are ultimately found to be owing. In other words, the Plaintiffs claim any settlement of a dispute over overtime compensation runs afoul of sections 206.5 and 1194.

The court also noted various federal court cases that have also reached the same conclusion. In Reynov v. ADP Claims Services Group, Inc. (N.D. Cal., Apr.30, 2007), after plaintiff quit his job, he signed an agreement releasing the employer “from ‘all claims, actions, and causes of action, of every kind, nature, and description, which exist as of the date you sign the Letter Agreement, arising out of or related to your employment.’” As consideration for the release, the plaintiff received “substantial compensation to which he was not otherwise entitled, including a severance payment in excess of $29,000.” The plaintiff argued the release was unenforceable under section 206.5. Relying on other state court cases, the Reynov court found that section 206.5 prohibited a release of wages due unless paid in full, and “wages are not due if there is a good faith dispute as to whether they are owed. Because [the employer’s] defense that [the plaintiff] was an exempt employee under California law would, if successful, preclude any recovery for [the plaintiff], a bona fide dispute exists and the overtime pay cannot be considered ‘concededly due.’” (citations omitted)

The court also rejected Plaintiffs’ argument that the newly decided case of Edwards v. Arthur Andersen (2008) supports their position. The Plaintiffs contended that because the Supreme Court found in Edwards that an employee’s statutorily unwaivable indemnity rights under Labor Code section 2802 could not be waived as part of a general release, a dispute over past overtime wages cannot be settled. The court recognized that an employee cannot waive his or her right to overtime pay under Labor Code section 1194 (as well as other statutorily provided rights), but the court also reasoned that there was not statute prohibiting employees from releasing their claims to past overtime as settlement “of a bona fide dispute over those wages.”

In conclusion, the court reasoned the public policy underlying section 1194 to protect worker from employer coercion to forgo overtime is not violated by its holding. The releases here were to settle disputes about whether the employees were properly paid in the past and the agreements did not bar employees from suing over future violations.

The opinion can be downloaded from the court’s website here in Word or PDF.
 

As a matter of law, Plaintiffs’ cannot recovery punitive damages for Labor Code violations. Brewer v. Premier Golf Properties (2008) 168 Cal.App.4th 1243, 1252. In Brewer, the court stated:

We are convinced, both by application of the “new right-exclusive remedy” doctrine and under more general principles that bar punitive damages awards absent breach of an obligation not arising from con-tract, punitive damages are not recoverable when liability is premised solely on the employer’s violation of the Labor Code statutes that regulate meal and rest breaks, pay stubs, and minimum wage laws.

Ibid. In Brewer, the plaintiff sought damages for pay stub violations, unpaid minimum wages, unpaid overtime, and meal and rest break wages. The court explained that Brewer’s claims for Labor Code violations arose from rights based on her employment contract, and therefore she was not entitled to recover punitive damages. Despite the clear holding in Brewer, I still routinely see punitive damages asked for in wage and hour cases.
 

California law has held that “employer” does not include an entity’s agents, and therefore there is no personal liability for Labor Code violations. Reynolds v. Bement (2005) 36 Cal.4th 1075, 1087-88; Jones v. Gregory (2006) 137 Cal.App.4th 798, 805. The California Supreme Court explained in Reynolds that under common law, corporate agents are not personally liable, and that the Labor Code does not provide a definition of employer that would warrant imposing personal liability on corporate officers for non-payment of wages.

The key quotes from the Reynolds court:

“This is true regardless of whether a corporation’s failure to pay such wages, in particular circumstances, breaches only its employment contract or also breaches a tort duty of care.”

“It is ‘well established that corporate agents and employees acting for and on behalf of a corporation cannot be held liable for inducing a breach of the corporation’s contract.’ ”

“And ‘[d]irectors or officers of a corporation do not incur personal liability for torts of the corporation merely by reason of their official position…’ ”