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California Employment Law

Commentary on Issues Facing California Employers

The Champions of Diversity Challenge – Support the Bay Area Urban Debate League

Posted in Articles

The Bay Area Urban Debate League (“BAUDL”) is a debate mentoring program that currently serves 14 Bay Area schools and over 400 students. Studies show that these programs improve literacy, GPA, graduation rates, and provide a host of other direct benefits to the participants, their schools, and the community.

Fox Rothschild LLP is proud to be among 13 law firms competing in BAUDL’s “Champions of Diversity” fundraising campaign. The initial round is this week, ending Friday, March 27th, during which the firms will compete to see which one can raise the most money and the most money per attorney in their Bay Area office(s). There will then be a second round among the top three finalists. The winner gets a full-page ad.

You can find updated results here and, if you’re moved to give, you can do so on behalf of your my favorite law firm here. Every bit helps and it’s a very worthy cause.

Top Ten Take-Aways from the Cornell HR in Hospitality Conference 2015

Posted in Advice & Counseling, Discrimination, Employment Litigation, Wage and Hour

I just returned from the Cornell HR in Hospitality Conference in Las Vegas with my partner Carolyn Richmond.  I participated in the Executive Summit and shared ideas with some of the most progressive minds in the hospitality industry.  Here is my top ten list of take-aways:

  1.  Once a year performance reviews are backwards looking, and millennials (soon to be 50% of the workforce) want consistent feedback.  As one panelist put it “you can’t drive looking through a rear view mirror.”  It is time to re-think how you provide feedback.
  2. Similarly, once a year employee engagement surveys can have limited value, especially when the management team has learned how to manipulate results (such as by scheduling the employee appreciation party right before the survey goes out).  Plus, if you aren’t going to fix the issues identified in the survey, conducting one can do more harm than good.
  3. While California law still allows employers to terminate (or not hire) for a positive marijuana test – be careful – if the drug is taken for a disability, the applicant/employee could assert a disability claim.  Do you want to be the test case?  Most employers do not.
  4. Do not assume your paystubs are compliant; paystub class actions are here to stay so audit them in each jurisdiction.
  5. When negotiating vendor agreements (an issue I have blogged about before), add a provision about ACA compliance and make the vendor take full responsibility for it.  Plus, specify that you are not joint employers, and the vendor will indemnify you for any assertions of joint employment status.
  6. Scrutinize your background check vendor, and carefully weigh the risks of getting the process wrong versus the risk of a negligent hiring claim.  Some jobs and industries warrant (or require) background checks, but many do not.
  7. Do not assume that pay equity exists just because employees with the same job title are in the same “salary band.”  If all women are at the bottom of the band, then you will need to justify why or rectify.  Moreover, the rationale that the men were better negotiators upon hire is not a viable defense to a pay equity claim.
  8. Be careful before you offer to pay a departing employee’s Cobra as part of a separation agreement; you could inadvertently mess up their ability to get coverage on the exchange.
  9. When hiring part-timers (who may not work enough hours to get health coverage), specify in the offer letter that they will be working “variable hours.”
  10. While documentation of performance deficiencies is still critical to defending claims, often it makes sense to move people out quickly and pre-empt a retaliation claim; as a presenter put it “be slow to hire but quick to fire.”

Conduct Under a Microscope at Kleiner-Perkins Trial

Posted in Discrimination, Employment Litigation, Harassment

Unless you’ve seen it in person, it’s hard to appreciate how the litigation process magnifies and distorts people’s behavior. The ongoing trial of Ellen Pao’s discrimination and retaliation claims against Silicon Valley VC firm Kleiner Perkins is a recent example. What was the firm thinking when it invited only men to a dinner at Al Gore’s home? What were a partner’s motives when he gave Pao a gift of erotic poetry? When the firm accuses her of not being “a team player,” is the criticism valid or is it gender-based?

Comments and actions get scrutinized, questioned, and argued to a ridiculous degree. And in the end, what actually happened is far less important than how the fact finder (often a jury) perceives what happened. If more people understood how their actions would appear under the microscope of litigation, they’d never leave their work stations.

Takeaways?

Judge Says California Law On Independent Contractors Is Not “Remotely Close to Clear”

Posted in Class Actions, Employment Litigation, Wage and Hour

Companies have a lot to lose if they misclassify employees as independent contractors. The affected workers can sue (individually or as a class) for any number of wage and hour violations. Employers can also get in trouble with the Internal Revenue Service, the Employment Development Department, the US Department of Labor, the Division of Labor Standards Enforcement, the Franchise Tax Board, and others.

So it would be nice if there was a clear test that could be applied in a straightforward manner. But there isn’t. The Employment Development Department, for example, uses a test that includes three “significant questions,” three additional questions, and seven questions that address “additional factors.”

Now, as noted by Kat Greene at Law360 (subscription required) a federal judge here in San Francisco is chiming in on the unfortunate state of the law. The Honorable Vince Chhabria of the US District Court, in addressing whether certain drivers qualify as independent contractors, issued a decision saying that the test applied by California courts “provides nothing remotely close to a clear answer.” So the issue will go to a jury that, according to Judge Chhabria, “will be handed a square peg and asked to choose between two round holes.”

Welcome to California employment law in 2015: potentially disastrous penalties for violating laws that are vague and hard to apply.

Takeaways:

  • Pay close attention to these independent contractor determinations. Recognize that different agencies use different tests.
  • Get legal help if you need to.
  • Consider moving your operations elsewhere. Qatar maybe. Please turn out the lights if you’re the last to leave.

 

Three Reasons Why the Deck Is Stacked Against California Employers

Posted in Discrimination, Employment Litigation, Wage and Hour

California employers can be forgiven for feeling like they have a giant target on their backs. Here are three reasons why:

  1. Employment claims are easy to file, but hard to get rid of. The major barrier to filing a lawsuit is convincing one of the 170,000 active members of the California bar to take the case. But once it’s filed, you can’t get the case dismissed on the pleadings if the complaint states a claim under any possible legal theory. Employers can seek summary judgment, but they must first give the plaintiff an adequate chance to conduct discovery and then (in state court) give it 75 days’ notice. Even then, many judges are reluctant to grant summary judgment because they know they can be reversed.

  2. The employee’s claims are often presumed to be valid. As for the substantive law, several presumptions operate against employers. Employees categorized as exempt are presumed to be nonexempt. Independent contractors are presumed to be employees. Wage and hour requirements and discrimination laws are liberally construed with an eye toward protecting employees. This does not make for an even playing field.
  3. A successful plaintiff can recover attorneys’ fees far more easily than a successful defendant. If the employee wins on a wage claim or a discrimination claim, the employer almost always has to pay the employee’s attorneys’ fees. If the employer wins, the bar is set so high for recovering fees that it’s all but unattainable.

That’s why the best way for an employer to win an employment dispute is to avoid it in the first place. As I’ve said before, prevention is key.

Fight To Halt The Los Angeles Hotel Minimum Wage Ordinance Continues

Posted in Wage and Hour

Since my last post on February 19, 2015 on the pending request for injunction filed by two Hotel Associations to stop implementation of the Los Angeles Citywide Minimum Wage Ordinance on July 1, 2015, there has been a lot of activity in the litigation.

First, Unite/HERE Local 11 (“Local 11”) filed a motion to intervene and submitted a brief in opposition to the injunction.  Local 11 argues that it has a “significant protectable interest” in the litigation, and that those interests are not adequately protected by existing parties (the Hotel Associations or the City).  Local 11 further argues that the Hotel Associations’ arguments that the Ordinance is pre-empted by the National Labor Relations Act (NLRA) lack merit, and that basing a pre-emption argument on lobbying history or allegations about the subjective motives of City Council members (alleged to be pro-union) is inappropriate.

Second, the City also filed an opposition to the Hotel Associations’ motion.  The City argues that the Hotel Associations’ pre-emption claim “has no chance of success” and that its contention that Local 11 had a “covert role” in the legislative process is “irrelevant,” “unsupported and false.”  The City also argues that the fact that unionized employers can waive rights imposed by the Ordinance (and negotiate alternate or lower wage rates) is immaterial to pre-emption, and consistent with the NLRA.  The tone of the City’s opposition is conveyed in the following quote:

Plaintiffs are clearly frustrated that their own lobbying efforts failed to prevent the enactment of the Ordinance.  Such a situation, however, does not render the Ordinance pre-empted by the NLRA; it is simply the outcome of the legislative/political process and not subject to judicial interference or fact-finding.”

The City essentially argues that if the hotels have an issue with the Ordinance, they should address it with the legislature and not the courts.

Third, the timing for the hearing has been modified so that the Hotel Associations’ reply brief is now due on March 23rd with the hearing on the Preliminary Injunction now set for April 6, 2015.

The ruling on the injunction could have broad impact on pending efforts to raise the minimum wage city-wide for all businesses and not just hotels.  Stay tuned for the outcome.

 

 

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.