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California Employment Law

Commentary on Issues Facing California Employers

Can California Employers Prohibit Moonlighting?

Posted in Wage and Hour

If a company hires someone for full-time employment, it’s natural to want that person’s undivided attention. So it seems only reasonable that an employer can tell someone: “Hey, if we’re paying you for full-time work, you can’t work for anyone else.” Right?

Wrong. Labor Code §96(k) authorizes the Labor Commissioner to pursue “claims for loss of wages as the result of demotion, suspension, or discharge from employment for lawful conduct occurring during nonworking hours away from the employer’s premises.” That’s why outright bans on moonlighting are a problem in California.

Here’s what employers CAN do:

  • They can prohibit employees from creating conflicts of interest. So they don’t need to tolerate employees working for competitors, contractors, clients, vendors, and the like.
  • A moonlighting employee can be held to the same standards regarding performance, attendance, and productivity as other employees. If they’re coming to work late, not getting their work done, or not working up to company standards, the employer is free to address those issues.
  • Howl at tonight’s full moon and lament the fact that California makes things so hard for employers.



Are Office Betting Pools Legal in California?

Posted in Articles

March madness will soon be underway.  But are office pools legal?  As employment lawyers, is it our responsibility to wipe out another hallowed workplace tradition just like we did with binge drinking and sexual harassment at office holiday parties?

In California, according to Penal Code section 337a, gambling can be a felony or a misdemeanor.  But Penal Code section 336.9 creates an exception for betting pools between people who are not acting for profit, other than the same stakes available to every participant.  The exception applies as long as the pool isn’t being run online and no more than $2,500 is at stake.  This doesn’t make the pools legal.  But instead of a potential felony, it’s an infraction and the maximum penalty is a $250 fine.

So are the pools illegal?  Technically, yes.  But they’re just a little illegal.  For most people, the odds of getting in legal trouble for an office pool are very slight.  But probably not as slight as the odds of a 16th seed winning the NCAA tournament.  The WSJ puts those odds at  384,000,000 to 1.

9th Circuit Asks CA Supreme Court to Explain Rest Day Requirements

Posted in Class Actions, Wage and Hour

The 9th Circuit Court of Appeals is asking the California State Supreme Court to interpret sections of the California Labor Code requiring at least one day of rest per week. This is reminiscent of a similar request last year by the 9th Circuit for the CA Supreme Court to explain what the heck “suitable seating” was.

Labor Code sec. 551 says that: “Every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven.” The Ninth Circuit is asking, among other things, whether the day of rest is calculated by the workweek or on a rolling basis for any seven consecutive days. If the CA Supreme Court answers that it’s a rolling seven-day period, such that employees can’t work seven consecutive days over different pay periods, expect a new tidal wave of class action litigation.

While we rarely turn to the Bible in this blog, I feel compelled to note that according to Exodus 31:12-14, God told Moses that anyone who works on the day of rest is to be put to death. While that seems harsh even to some of us who represent employers, it makes about as much sense as punishing employers for violating laws that no one understands.

Continuing with the biblical theme, enjoy this lovely image depicting Moses holding back the flood of litigation.

California Paid Sick Leave — Yet Another Reason for Restaurants to Abolish Service Charges and Automatic Gratuities

Posted in Wage and Hour

I was presenting to a terrific group of HR Directors at the LA Restaurant HR Association last week, and a question about California’s new paid sick leave requirements came up. 

One sleeper provision of that new law requires that sick leave be paid at the employee’s “regular rate” and not the base hourly rate.  Of note, the “regular rate” for sick leave purposes is not necessarily the same calculation as the “regular rate” for overtime purposes.  For sick time, the rate is calculated by dividing the employee’s total wages (not including overtime) by the total hours worked in the full pay periods of the last 90 days before the sick pay is used.  In contrast, the regular rate for overtime is calculated by dividing the total wages by the total hours worked in that work week.  This nuance had the HR Directors scratching their heads as to how they were going to be compliant given that every hour of sick pay could technically be required to be paid at a different rate! 

In trying to figure out a fix, we realized that this problem can be avoided.  This nuance only becomes an issue if there are additional types of non-discretionary compensation paid to employees (such as commissions, piece rate pay, and service charges).  Tips are discretionary and are not included in the overtime rate.  But if the tips are automatic gratuities (aka service charges), they are non-discretionary and should be included in the regular rate for overtime.  Many restaurants have already done away with this type of automatic gratuity and service charges for private parties, buy-outs and large parties, due to IRS changes in how such gratuities are taxed that took effect last year.  In fact, I blogged on this issue and suggested that restaurants revisit this type of service charge to avoid certain taxes and to simplify overtime calculations

What does this have to do with sick pay for restaurants?  Well, the only real non-discretionary extra compensation a restaurant has is a service charge.  If there are no service charges, and only discretionary tips/gratuities, then there is no “regular rate” issue to worry about either for overtime purposes or (starting in July) for paid sick leave.   Therefore, yet another reason to revisit those private party contracts, banquet event order forms, private dining contracts, buyout contracts, bar menus for bottle service, and restaurant menus that still stay “a gratuity of 18% will be added for parties of 8 or more.”   If not, get ready for a mega-migraine sized paid sick leave compliance headache.


6 Questions to Answer Before Your Company Receives a Harassment Complaint

Posted in Discrimination, Harassment

When you read about sexual harassment claims, the focus is on what the alleged harasser is accused of doing. The sordid details are what attract readers. The Marchuk v. Faruqi & Faruqi case is one recent example.

But in the real world of harassment litigation, the focus is on what the employer did. That’s because the plaintiffs and their attorneys don’t just want a verdict against the usually shallow-pocket individual defendant. They want a verdict against the usually deep-pocket employer. To get that, they need to show that the employer didn’t take the issue seriously.

The time to start preparing to defend these claims is before they’re brought. And you can start by answering these questions:

  1. How current is the company’s policy against harassment? Does it recognize the breadth of activity that can constitute harassment? Does it list the various protected categories and provide multiple avenues for employees to raise concerns?
  2. Can employees find the policy easily? Better yet, have they signed a form acknowledging receipt of the policy (or the handbook containing it).
  3. Have managers received the bi-annual harassment training mandated by California law?
  4. Do managers behave appropriately? Legally, the actions of managers and supervisors are deemed actions of the company. If there were instances where managers didn’t behave appropriately, have the issues been addressed in a way that is reasonably calculated to prevent them from recurring?
  5. When managers observe inappropriate behavior at work, do they respond effectively? A manager turning a blind eye to bad behavior will be portrayed as the company condoning it.
  6. Has your company identified a qualified investigator to evaluate harassment complaints? You want someone who’s far enough from the situation to be impartial, who has experience investigating these types of issues, and who understands how to question witnesses.

How your company responds when it receives a harassment complaint remains critically important. But there are steps employers need to take before that point to show that they’re serious about providing a harassment-free workplace.

Hotel Associations Sue to Block Los Angeles Minimum Wage Law

Posted in Wage and Hour

As reported here, two hotel associations have filed a lawsuit and are now seeking an injunction to stop the implementation of the Los Angeles Hotel Citywide Minimum Wage Ordinance (summarized here).

The motion for injunction claims: (1) That the ordinance is pre-empted by federal labor law; (2) that it “insidiously aids the Hotel  Workers’ Union”; and (3) that association members will suffer “substantial and irreparable harm” because they will either be required to bargain with the Hotel Workers’ Union at a disadvantage, or forced into signing “neutrality” agreements.  The motion for injunction is currently set for hearing on March 23, 2015.

Many hotels have been struggling with compliance efforts given the wide breadth of the ordinance as currently drafted, and are hoping for some clarity from the court.  Stay tuned for more updates.

CA Court Changes Rules on Healthcare Worker Meal Periods

Posted in Class Actions, Wage and Hour

Companies who employ healthcare employees on shifts longer than 12 hours need to change their meal period rules immediately. It would be even better if they can go back in time three years and change them then. That’s because yesterday, in Jazmina Gerard v. Orange Coast Memorial Medical Center, the court of appeal said that the wage orders healthcare companies have been following for years were wrong and contrary to statute.

Wage Orders 4 (Professional, Technical, Clerical, Mechanical & Similar Occupations) and 5 (Public Housekeeping Industry – which includes hospitals) specifically allow employees who work over eight hours to waive one of their meal periods. Since the right to a third meal period doesn’t kick in until 15 hours, plenty of healthcare employees were working 12 – 15 hours without receiving a second meal period. But they’d waived the meal period in writing, had the right to revoke the waiver at any time, and were paid for the time they worked. And their employers were following the wage orders, which they’re supposed to do, right?

Wrong, wrong, wrong!!! According to the appellate court, those employers have been on “clear notice” that they should have been providing two meal periods to employees who work more than 12 hours. Therefore, the rule should apply retroactively. The Industrial Welfare Commission in enacting those wage orders didn’t realize they were illegal, but the employers who followed them should have known, and now they must pay.

If you have healthcare workers who work more than 12 hours, here are your takeaways:

  • Ignore any waivers they signed and make sure they get two meal periods OR make sure they’re clocked out before 12 hours.
  • Prepare for a new wave of class actions.

Here’s a link to the Orange Coast decision.

Have Questions about Paid Sick Leave and Other Wage-and-Hour Challenges? Come Hear Me Speak!

Posted in Wage and Hour

If you work in the hospitality industry in Los Angeles, and have questions about how to implement California’s new paid sick leave requirements, or want the latest on other wage-and-hour compliance tips and challenges, then you have two chances to come hear me speak.

First, on February 17th for the Los Angeles Hotel Human Resources Association. And second, on February 18th for the Los Angeles Restaurant Human Resources Association.

Both groups are by invitation only, so email me if you’d like to attend.  Hope to see you there!



Employee With 6-Figure Income Sues Employer for Not Paying Minimum Wage… Wait, What?!?!

Posted in Wage and Hour

This real life case study is presented by Carlos Becerra, making his blogging debut. The facts have been changed to protect the anonymity of those who prefer anonymity.

In June 2010, Ms. Glamour, a highly capable stylist, began working for HONEY-DO, a salon in Beverly Hills, as a receptionist earning $10 per hour. A month later, HONEY DO promoted Ms. Glamour to work as a stylist and paid her on a “piece-rate” basis. Whatever customers paid HONEY-DO for treatments by Ms. Glamour, she received 30%. But she was not paid for the “down time” between treatments, and was not allowed to leave the shop between appointments, in case a “walk-in” wanted a treatment.

A few years later, Ms. Glamour, despite averaging over $50 per hour, complained to the owner about not being paid for her down time. The owner balked at the complaint and said that HONEY-DO simply couldn’t afford to pay her for hours that could not be credited to a client.

That’s what the owner said. Here’s what the law says: On-call or standby time at a job site is considered hours worked that must be compensated even if the employee does nothing but wait for something to happen.  According to Armour & Co. v. Wantock“an employer, if he chooses, may hire a man to do nothing or to do nothing but wait for something to happen.” Employers who pay their employees on a “piece-rate” basis must pay them a separate hourly minimum wage for time spent on tasks unrelated to their primary work, even when an employee’s total compensation for a pay period does not fall below the minimum wage. (As we’ve recently discussed, even sleeping employees may be entitled to payment.) 

So guess what happened? Ms. Glamour hired a lawyer, who happened to be one of HONEY-DO’s loud-mouthed clients and the lawyer sent HONEY-DO a scathing demand letter.  Facing an expensive uphill legal battle, HONEY-DO ended up paying a five-figure settlement. Ms. Glamour later opened up her own salon.


If you’re a CA employer who pays employees on a “piece-rate” basis and the employees have downtime, get qualified legal advice immediately. Steps employers should take include:

  • Implementing a policy defining and setting the rate of pay for non-productive work time and making sure that employees know the policy.
  • Ensuring that itemized wage statements contain a line item for non-productive work time and the rate it’s being paid at to comply with Labor Code Section 226.
  • Conducting regular audits of daily time sheets, payroll data and wage statements to confirm that employees are being paid all wages, reporting time pay, standby time, non-productive work time and overtime.

Remember, a single wage and hour violation can be worse than a whole string of bad hair days.

NLRB Says Employer Email Can Be Used for Organizing

Posted in Labor law

In keeping with its clear pro-union agenda, late last year, the NLRB overruled its past precedent and held that employers who grant employees access to their email systems must now allow them to use the email system for Section 7 activity during nonworking time. Under the NLRA, Section 7-protected activity could include such things as emails between employees soliciting support for the union or some other concerted activity for the employees’ mutual aid or protection.

The NLRB will now presume that employees who have been given access to the employer’s email systems in the course of their work have the right to use the email systems to engage in Section 7-protected communications on nonworking time. But an employer may rebut the presumption by demonstrating that special circumstances necessary to maintain production or discipline justify restricting its employees’ usage.

This rule applies to most businesses, whether unionized or not. Employers that did not give employees access to their email systems before do not need to do so now. However, employers that presently restrict access for business purposes only must now give employees access to engage in Section 7 communications during nonworking time, unless they can justify a complete or partial restriction on employee use.

The decision leaves many questions unanswered. For example, what special circumstances are necessary to justify a total ban or partial restriction on email usage?  Also, how can an employer lawfully ensure that its employees are working during working time without conducting unlawful surveillance on the employees—another unfair labor practice under the NLRA?

While waiting for answers to these questions, we will keep you posted of any developments.