Header graphic for print

California Employment Law

Commentary on Issues Facing California Employers

What a Headache! California Enacts Paid Sick Leave (AB 1522)

Posted in Wage and Hour

California is now the second state in the nation to implement paid sick-leave state wide (Connecticut is the other). Thankfully for employers, the Healthy Workplaces, Healthy Families Act of 2014 (“HWHF”) will not take effect until July 1, 2015, giving employers some time to plan ahead.

The HWHF is very broad in scope. It covers all employers regardless of size, with limited exceptions for union employees, construction employees, and providers of in-home support services. There is no small employer exception.

The union exception is limited to employees covered by collective bargaining agreements that expressly provide for: (1) wages, hours of work, and working conditions of employees; (2) paid sick days (with final and binding arbitration for disputes arising from sick days); (3) pay premium wages for all overtime hours worked; and (4) a regular hourly rate of not less than 30% more than the state minimum wage.

Like the San Francisco sick leave ordinance, the HWHF requires employers to accrue sick pay at a rate of “not less than one hour per every 30 hours worked.” The accrual begins on either the first day of work, or as of July 1, 2015 when the law becomes effective, whichever is later. For a full-time employee working 2080 hours per year (or a salaried employee), that would be 69.33 hours (8.66 days) per year.

Employees will be able to use that accrued sick time after 90 days of employment. Accrued sick leave can be limited to six days (48 hours) total, and an employer can limit carryover to three sick days (24 hours) each year.

Sick days can be used for the employee or a family member (defined as parent, child, spouse, registered domestic partner, grandparent, grandchild, or sibling). Time off can be used for illness or preventative care.

Employers with paid sick leave or paid time off policies do not need to change anything if their current policy:

  • Makes available an amount of leave that may be used for the same purposes as the new law (i.e. sick/family sick); and
  • Satisfies the accrual, carry over, and use requirements of HWHF; or
  • Provides for no less than 24 hours (3 days) of paid sick leave, or equivalent paid leave or paid time off per year.

There will be more to come on HWHF. I have a feeling the devil will be in the details. Get out your aspirin!

 

 

Taxes on Meals for Employees: The Taxman Cometh For Your Lunch

Posted in Class Actions, Employment Litigation, Wage and Hour

For decades, employers have relied on IRS policy that says when meals are provided for “the convenience of the employer,” the value of the meal is not taxable income. That policy is apparently about to change. The IRS announced on August 26, 2014 in its Priorities Guidance Plan that one of its new “priorities” will be new guidance “regarding employer – provided meals.” The Wall St. Journal reported on September 4, 2014 (subscription required) that IRS auditors are “flagging the issue and demanding back [payroll] taxes from companies amounting to 30% of the meals’ fair market value.” 

This development will affect the company cafeterias at high-profile tech companies in California as well as thousands of hotels and restaurants that provide free meals to employees. It is also a near certainty that where the IRS treads the state taxing authorities will be close behind.

This development may also impact the calculation of the “regular rate” for purposes of overtime compensation. If the value of the free meal is taxable compensation, Plaintiffs’ class action lawyers (who are already circling in the waters on this issue) will argue that the value of the meals must also be blended into the hourly rate on which overtime is calculated. For example, if the stated hourly rate is $10 (overtime = $15/hr) and the meal is worth $4, arguably, the new “regular rate” for an eight-hour shift would be $10.25 (overtime = $15.125/hr). California law on this “regular rate” and overtime point is not crystal clear, and we can expect litigation over the issue in the future. Some employers may want to proactively adjust their payroll practices in order to head off the potential problem.

We all knew there’s no such thing as a free lunch. We’re just learning now that the free lunches may be way more expensive than previously thought.

Free Lunch

California Supreme Court Reaffirms Traditional Analysis Of “Joint Employment” for Franchisors

Posted in Employment Litigation

On July 30, we blogged about the recent efforts of the National Labor Relations Board to hold corporate  franchisors, such as McDonald’s, liable for the acts of individual franchisees toward employees under the theory that  the “parent” company is a “ joint employer.”  We opined that this effort was a “stretch” to deviate from traditional principles on the part of the federal agency, and which threatened the viability of franchising as a business model.

On August 28, 2014, the California Supreme Court provided a dose of fresh air, clarity, and common sense to this issue by holding that Domino’s Pizza could not be the joint employer of a worker who accused a franchisee operator of harassment. The opinion upheld the granting of summary judgment in favor of Domino’s. It also reaffirmed the decades-old analysis which focuses on the degree of real control the corporate franchisor may exercise over the employment practices of the franchisee in  light of the “totality of the circumstances.”

The Supreme Court reversed the opinion of the Court of Appeals (which we lamented in this June 2012 post), and sent a clear message to trial courts that it’s permissible to summarily dismiss claims of “joint employment” where the plaintiff lacks sufficient facts to demonstrate “control” on the part of the franchisor parent. As the court stated:

A franchisor [may] impose comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor ‘controls’ the enterprise. However, the franchisee retains autonomy as a manager and employer.  It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior.

This sensible opinion from the high court of California will likely influence other state and federal courts, including those federal circuit courts that may hear appeals from the NLRB on the issue of “joint employment.” You can read the opinion here (pdf).    

Employees Who Attribute Bad Behavior to a Disability – Supreme Court Asked to Clarify Issue

Posted in Disability discrimination, Discrimination

Just last week I was complaining about the lack of guidance for employers dealing with employees who blame their bad behavior on a disability. Now a fired financial adviser is asking the Supreme Court to weigh in on the issue.

Morgan Stanley fired Ryan Foley from his job as a financial analyst when he removed computer hardware from the office without permission and then denied having done so. Foley sued saying that he was experiencing his first ever bipolar episode and that the company should literally be more accommodating. The court granted summary judgment for Morgan Stanley, Foley appealed, and the 11th Circuit Court of Appeals affirmed.

Now Foley is asking the U.S. Supreme Court to take the case up on a writ. Will it do so? Unlikely. The Court receives thousands of writ petitions and grants only around 2%. Plus, they usually like to see more detailed analysis by the appellate courts before they dive into an issue.

It would be nice if there was something definitive to guide employers dealing with employees who use disability as an excuse for inappropriate behavior. But unless the employees pose a tangible threat to their own health or safety or the health or safety of others, we have to keep waiting for that guidance.

Until then, employers need to proceed cautiously. At a minimum, this includes determining whether the employer is required to engage the employee in the interactive process and documenting the steps taken and the justification for taking them.

Employees Who Attribute Bad Behavior to a Disability – 9th Circuit Adds to Confusion

Posted in Disability discrimination, Discrimination, Employment Litigation

I’ve complained before about the lack of guidance for employers dealing with employees who attribute their bad behavior to a disability. The Ninth Circuit’s August 15, 2014 decision in Weaving v. City of Hillsboro (pdf) only adds to the confusion.

The City of Hillsboro, Oregon fired Weaving from his job as a police sergeant after an investigation determined that Weaving “created and fostered a hostile work environment for his subordinates and peers.” ["Hostile work environment" being used in this context to describe bullying and intimidation not related to membership in a protected category.]  Weaving sued claiming that the City fired him because of a disability (ADHD). At trial, he recovered over $630,000 in damages. The City appealed and the appellate court reversed.

The court of appeal drew a distinction between being able to interact with others (which is a major life activity) and being able “to get along with others” (which presumably is not) . Distinguishing this case from precedents where the plaintiffs “were essentially housebound,” the majority concluded that Weaving was not substantially limited in his ability to interact with others. “To hold otherwise would be to expose to potential ADA liability employers who take adverse employment actions against ill-tempered employees who create a hostile work environment for their colleagues.”

A lengthy dissent argued that, even if the policy rationale made sense, the majority had failed to follow circuit precedent and had usurped the power of the jury to weigh the evidence. (Patrick Dorrian at Bloomberg BNA Employment Discrimination Report wrote a more detailed discussion of the case – with insight and analysis from yours truly – that you can access here (but you’ll need a subscription).)

The outcome probably would have been different under California law (which interprets “limits” and “life activities” more broadly).

Employers need to tread carefully in deciding whether or how to discipline employees who attribute their bad behavior to a disability. If judges can’t agree on what the law requires, we’re a long way from having a workable standard that employers can use to guide their decisions.

24 Questions to Ask Before Terminating an Employee

Posted in Employment Litigation

Of all the employment decisions employers make, none get litigated more often than termination decisions. To protect your company, review these questions before any termination.

  1. Does the employee have a contract of employment? If so, what does it say about grounds for termination?
  2. Has the employee acknowledged in writing that employment is terminable at will?
  3. Does the employer have any policies requiring it to take specific steps before termination? If so, has it taken those steps?
  4. Has the employee recently engaged in protected activity, such as complaining about discrimination, harassment, or some unethical or unlawful activity?
  5. Has the employee asked for an accommodation for a disability? Is there reason to believe that the reason for termination may be attributable to a disability?
  6. What is the reason for the termination?
  7. How strong is the evidence to support that reason?
  8. Has the issue been addressed with the employee? If so, is that documented?
  9. How long has the employee worked for the company?
  10. Does the employer plan to refill the position? If not, how will the former employee’s duties be covered?
  11. Is the employee in any protected category that is underrepresented within the organization?
  12. Has the employer considered less severe actions (warning, suspension, a cut in pay)?
  13. Has the employer dealt with similar issues in the past? If so, is this issue being handled consistently with the prior ones? If not, what’s the basis for treating this one differently?
  14. If the reason for termination is performance related, has the employee received performance evaluations that identify the problem?
  15. Has the employee received any awards or positive recognition?
  16. If the reason for termination is based on misconduct, has the employee been given a chance to tell his or her side of the story? Has the issue been investigated?

  17. Is there reason to believe that the employee has not received all the compensation and meal or rest breaks that applicable law requires?
  18. Does the person hold any other positions with the organization (such as being a corporate officer or director or trustee of a benefit plan)?
  19. If the employee challenges the decision, what grounds does the company think the employee will raise?
  20. Is there any particular reason why the decision may be perceived as unfair?
  21. Are there steps the company needs to take before termination to preserve client or customer relationships?
  22. Are there steps the company needs to take before termination to protect its information systems or confidential information?
  23. Is there any pending or threatened litigation that will require the employee’s involvement?
  24. Is there reason to be concerned that this employee may react violently?

The answers to these questions will help you determine if termination is appropriate and if you should take further steps, such as consulting experienced counsel, to protect your company.

Balancing the Needs of Pregnant Women vs. the Employees Who Cover for Them

Posted in Discrimination

I was at spin class a few weekends ago and was talking to one of my spin friends, a woman who was just returning to her work-outs after having a baby. I asked her how things were going at work. She told me that it was hard to leave at 5 pm to relieve the nanny, she felt resentment from some coworkers, and was concerned they were holding it against her that she had taken time off and now needed to work less than she had before.

As an employment lawyer I’ve lived this issue from both sides. I hear from employees (and their counsel) about the accommodations required by law and how my clients didn’t meet them. Then I hear from the employers who struggle to make those accommodations and then deal with the related fallout. It was with this dual perspective that my friend and I were able to have an honest conversation about the challenges facing both employers and employees. Here are some of my takeaways.

Rights for Pregnant Women and New Moms

  • Pregnant women and new moms have lots of rights, including the right to take time off, the right to retain medical benefits, the right to reinstatement, and the right to lactation accommodation upon return.
  • Many women work in places where they need to assert those rights, and they should. Employers who do not meet their legal obligations, do so at their own risk.
  • Employers also need to ensure that requests for accommodation are met with empathy (as opposed to frustration) for the women who are entitled to them.
  • Too many women face obstacles for just trying to take care of themselves. That isn’t fair.

Rights for Employees Who Cover for Them

  • Often meeting the legal obligations is the easy part. The harder part is figuring out what an employer should do about the very real resentment that others feel for having to cover for pregnant women and new moms.
  • We’ve all seen some pregnant women “do it all” and work 100% up to the minute they give birth. We’ve seen others answering emails and phone calls from the hospital.
  • But we’ve also heard pregnant women blame mistakes on “pregnancy brain” and let others pick up the slack; take time off for medical reasons in places that appear to be more like a vacation; and pass off work priorities to colleagues who are already at or beyond capacity.
  • Working with someone who is pregnant, or on maternity leave, or is working at limited capacity upon return, can put real pressure on the team. Many of those team members also have families and are struggling for balance.
  • Yet, to acknowledge the reality of the inconvenience of accommodations and the resulting resentment is not only politically incorrect, it comes off as anti-woman and can create a risk of discrimination claims.

So getting back to my friend, what should she do given these dual realities? The suggestion I had was simple. I asked her if she had thanked the people who had covered for her. She thought it about it and said “probably not as much as I should have.”

When I saw her the next week at spin she told me that she had thought a lot about our conversation, and had made a conscious effort to thank everyone who had (and still was) helping her. She was met with a lot of warmth, and somehow, the resentment seems to have faded.

My main takeaway – there are two sides to this story and neither can be ignored. On the one hand, a little empathy and understanding is helpful when mixed in with meeting legal obligations. On the other hand, a little gratitude goes a long way.

 

Don’t Get Burned by Summer OFCCP Enforcement

Posted in Discrimination, Wage and Hour

 

Here at the California Employment Law Blog, we don’t talk that much about the unique requirements imposed on federal contractors. But our partner Ken Rosenberg has written an excellent summary of how the OFCCP has been turning up the heat on government contractors. Here it is (pdf).

Revisit Your BYOD Policy to Make Sure Employees Are Properly Reimbursed for Cell Phone and Data Use

Posted in Wage and Hour

Many employers allow employees to use their own personal cell phones for work. Some employers have BYOD (Bring Your Own Device) policies to address important issues such as confidentiality of employer data, privacy, and reimbursement. Other employers let employees use their phones but have not implemented such policies. Whether you have a BYOD policy or not, take note – California law now requires employers to reimburse employees for work-related calls and data usage.

The issue in a recent case, Cochran v. Schwan’s Home Service, Inc., was framed as follows: “Does an employer always have to reimburse an employee for the reasonable expense of the mandatory use of a personal cell phone, or is the reimbursement obligation limited to the situation in which the employee incurred an extra expense that he or she would not have otherwise incurred absent the job?”

The answer was direct: To be in compliance with California Labor Code Section 2802, “the employer must pay some reasonable percentage of the employee’s cell phone bill.”

The court rejected the argument that many employees had unlimited plans and did not incur extra expenses due to work-related calls. The court also rejected the argument that many employees had phones supplied and paid for by third parties like family members. Rather, to show liability, all the employee needs to do is “show that he or she was required to use a personal cell phone to make work-related calls, and he or she was not reimbursed.”

The court recognized that the issue of damages was more complicated, reversed the trial court’s decision denying class certification, and ordered the trial court to reconsider how such damages might be proved on a class wide basis with statistical sampling.

How should employers protect themselves from claims? Well, the tips we recommended last April still ring true including:

  • A handbook policy about expense reimbursement listing non-obvious examples such as data plans and phone calls;
  • A clear BYOD policy with reimbursement for a portion of the data plan; and
  • An exit practice for departing employees to ensure all work related expenses have been submitted and reimbursed.

While the tips are the same, the stakes are now higher for employers who neglect to implement them.

 

6 Factors for Managers in Deciding Whether to Document Conversations with Employees

Posted in Discrimination, Employment Litigation, Harassment

Despite the popular saying, possession is not 9/10ths of the law. Judging by my desk, if anything is 9/10ths of the law, it’s documentation.

Lawyers are always asking their clients for documents. But in the real world (or so I’ve heard from people who claim to have been there), it’s not realistic to ask managers to document every conversation with an employee. So how should a manager decide which discussions to document? These six factors will help you decide.

  1. Is the employee using buzzwords? If there’s any mention of “discrimination,” “retaliation,” “harassment,” or the like, you’d better document it. I’ve talked about how the definition of “hostile work environment” has been stretched beyond recognition. But if it’s mentioned, better document that, too.
  2. Does the employee sound like he or she has been researching what the law is? Does the employee keep mentioning ”legal rights”? If employees even hint that they may be considering some sort of claim, you want to document what was said.
  3. Is the employee subject to pending or imminent corrective action or a layoff? Retaliation is an adverse action by the employer in reaction to protected activity by the employee. If some type of adverse action is or may be iminent, you will want documentation of what issues the employee raised and when.
  4. Is the employee’s performance or behavior getting worse? Managers don’t like delivering bad news. Who does? But if you’re seeing a trend in terms of worsening behavior, it’s best to document it at the start.
  5. Are accommodations for a disability being discussed? The law, especially in California, requires employers to engage employees seeking accommodation in an “interactive process.” Document it.
  6. Does this seem like the kind of thing you might need to remember details of a few months or years down the road? This is the catch-all. Savvy managers should have an idea of which discussions are most likely to become important later. If you don’t have that, err on the side of documenting.

It’s not unheard of for managers to be deposed about events or conversations that occurred five or more years earlier. Imagine the sense of relief when a discussion has become the subject of litigation and you find your notes of what was said all those years ago. You’ll definitely make your lawyers happier – which I think is a goal more people should strive for.