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Conflict between an employee and his boss
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Have you ever felt powerless in your job?  Felt that there was no way you could have impact on the corporate environment?

Well, recent events have shown how the catalyst theory is alive and well in corporate America.

Take Uber for example.  A mere four months ago, a lone female engineer who had left the company after feeling mistreated wrote a blog post.  Within days, that post went viral, caused Uber’s CEO and Board to take notice, and sparked a chain of events that was fascinating to watch (and blog about).

One woman and her blog post ignited a chain reaction that culminated with the CEO’s resignation on June 20th.  As reported by news outlets, Travis Kalanick was forced out by Uber’s Board after several investors demanded his resignation, in large part due to the sexual harassment probe initiated by that single blog post.  The allegations in that one blog post wound up being the tip of the iceberg, with a reported 215 harassment complaints at the company, resulting in the termination of at least 20 executives.  Many of those harassment claims remain unresolved, and the company now has a mandate to change its culture and implement 47 different recommendations to make it a more politically correct company.

In fact, there are many other examples in the press about the catalyst theory at work, involving major television celebrities and executives.  Powerful people, who once seemed untouchable despite all types of bad behavior (that was widely known yet unaddressed) eventually fall or are forced out.  At times, karma really does catch up with people and justice can prevail.

So, if you are feeling powerless at your company, and think change can’t happen, well, think again.  Just read the headlines, because one person (and in this case one brave woman), can really make a difference.

 

 

 

 

 

It took three months, but the long-awaited report about Uber’s culture from former Attorney General Eric Holder and his law firm was published this week. You can read the 13-page report with its 47 recommendations here.  Uber’s Board of Directors voted unanimously to adopt all of the recommendations.

CEO, Travis Kalanick, will have a reduced leadership role.  Parts of his job will be given to a new Chief Operating Officer charged with implementing the Board’s recommendations. There will also be more Board oversight of management, and steps to create a more independent Board that can actually hold management accountable (including financially).

In addition, it was also reported that the CEO is taking an immediate and indefinite leave of absence.  It has been a rough year for Kalanick, whose mother recently died in a boating accident where his father was also seriously injured.

In his statement to Uber employees he writes: “The ultimate responsibility, for where we’ve gotten and how we’ve gotten here rests on my shoulders. For Uber 2.0 to succeed there is nothing more important than dedicating my time to building out the leadership team. But if we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader that this company needs and that you deserve.”

The report also reads like a help-wanted advertisement to consultants of all types as it requires:

  • Mandatory Leadership Training for Key Senior Management and Executive Team Members
  • Mandatory Human Resources Training
  • Mandatory Manager Training
  • Interview Training

Uber is also in the market for several senior executives including a new Chief Operating Officer, Chief Financial Officer, Senior Vice President of Engineering, and General Counsel after many high profile departures.

There are also recommended changes to the Human Resources Department and complaint process, which seem long overdue.  As you know from prior blog posts, the way Human Resources reportedly handled the harassment issues raised by female engineers was a lesson in how not to investigate a complaint.

Steps will also be taken to limit the party atmosphere (less alcohol and controlled substances at work) and to prohibit romantic or intimate relationships between individuals in a reporting relationship.  Hard to imagine that these protections were not already in place for a business with over 12,000 employees.

Probably the most entertaining recommendations were a revamp of the company’s core values to eliminate those that have been used to justify poor behavior, such as:

  • Let Builders Build
  • Always be Hustlin’
  • Meritocracy and Toe-Stepping
  • Principled Confrontation

Oh, and my personal favorite, the War Rooms will now be designated Peace Rooms.

Rainbow peace flag
Copyright: daboost / 123RF Stock Photo

Some are skeptical that Uber can change.  Whether it can depends on whether Kalanick and other senior managers can set aside the aggressive culture to walk-the-walk, and not just talk-the-new- peaceful-inclusive-talk.

After a flurry of activity in February, the news has been relatively quiet at Uber until this week.  We knew that reports of harassment by lady engineers triggered a massive investigation, and at the time, news reports indicated a formal report was due by the end of April.  But that day came and went.  Now, the wait is over, and Uber is in the news again.  Here is the latest:

Businessman cutting back jobs
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According to a report from Bloomberg, at least 20 Uber executives have been fired as part of the harassment probe, and more are being disciplined, after a law firm investigated a stunning 215 claims of sexual harassment.  According to reporting, of the 215 claims, 57 remain under investigation, 31 employees received counseling or training, and 7 received written warnings.

The New York Times also reported that Uber’s President of Asia Operations, and a longtime confidant of CEO Travis Kalanick, was fired after “reporters inquired about his actions to obtain the medical records of a woman who said she was raped by a driver” in India.

Meanwhile another law firm is also conducting an investigation led by former US Attorney General Eric Holder into claims made by Susan Fowler and other female engineers in February.  That investigation apparently is still ongoing.

In addition other senior executives are resigning for various reasons, including Uber’s Vice President of Product and Growth who reportedly resigned once an affair with an employee was revealed, as well as a female Global Policy and Communications Chief who resigned amid reported clashes with the CEO.

Yes harassment issues still reign in California, and top executives can lose their jobs because of it.  Even people who once seemed untouchable can fall from grace.

It remains to be seen if Uber’s new hires, including Francis Frei, a well-known Harvard academic who was recently hired as Uber’s first Senior Vice President of Leadership and Strategy, can transform the super aggressive “bro-culture” into one of diversity and inclusion.

Stay tuned.

I was recently invited to contribute a chapter on employment law to the 2017 Israel Desk International Legal Guide. As more and more Israeli companies bring their operations to the U.S., they learn firsthand the intricacies of our employment laws. The chapter outlines six trends that I suggested that they pay attention to. They include wage and hour laws, equal pay, accommodating disabled workers, whistleblower claims, local regulations, and trade secrets.

Copyright: slidezero / 123RF Stock Photo

On the topic of trade secrets, I had the opportunity to give a presentation in Tel Aviv last month on Protecting Your Trade Secrets in Silicon Valley and Beyond to members of IATI (Israel Advanced Technology Industries – an industry group for high-tech and life science companies). You can read my chapter on legal trends and see a copy of my presentation on trade secrets.

Fox Rothschild LLP’s Israel Practice Group is adept at helping companies based in Israel with their U.S. legal needs.

It’s not enough that a trade secret isn’t generally known to those who can gain value from it. To qualify for protection in California and the other jurisdictions that use the Uniform Trade Secrets Act definition (and under the Federal Defend Trade Secrets Act), a trade secret must be the subject of reasonable measures to maintain its secrecy.

If you find yourself litigating whether your company’s information qualifies for protection, you should expect a lot of time and effort to be focused on the steps your company took to protect that information.

Here are 22 steps companies can take. Obviously, they won’t all make sense in all situations.

1.      Have employees sign confidentiality agreements that meet current legal requirements.

2.      Have third-parties sign nondisclosure agreements.

3.      Have a written policy explaining how to handle trade secrets and prohibiting misappropriation.

Copyright: sam74100 / 123RF Stock Photo
Copyright: sam74100 / 123RF Stock Photo

4.      Train new employees to recognize what information is protected and how to handle it.

5.      Periodically retrain existing employees.

6.      Limit who has access to confidential information.

7.      Mark documents and files to identify the level of protection they’re to receive.

8.      Implement an information tracking system.

9.      Dispose of information properly.

10.  Regulate information that must leave the company.

11.  Encourage employees to report suspected misappropriation.

12.  Lock areas that contain confidential information.

13.  Place warning signs in areas that contain confidential information.

14.  Install security cameras.

15.  Monitor visitors to your company.

16.  Provide departing employees with copies of signed agreements and review key provisions.

17.  Confirm that departing employees have returned all company information and equipment.

18.  Terminate departing employees’ access to company systems and facilities.

19.  Ask departing employees about future employment plans.

20.  If the departing employee is going to a competitor or is evasive regarding his future plans, consider whether further action is necessary, such as requiring him to leave sooner, reviewing what systems he has accessed, sending a letter to the employee, and sending a letter to the prospective employer.

21.  Immediately investigate suspected misappropriation.

22.  Conduct a trade secret audit to determine if information is being properly protected.

Again, what is reasonable in one situation won’t make sense in others. The steps Google takes to protect its search algorithm will be very different from the steps that place by your office uses to protect its tomato soup recipe. I think the secret ingredient is basil, but that’s beside the point. The point here is that companies need to take those steps that are reasonable to safeguard their information. Because if they don’t, the information won’t qualify for protection.

California employers are required to provide employees with several documents upon hire.  But not all CA employers do.  I was working with a retail boutique chain last week and when I provided them the list of required onboarding documents, the manager said she has been in retail for 20 years and had never seen the documents!  In honor of the newly redesigned DFEH sexual harassment pamphlet, I thought I would provide a refresher (or in some cases, a first look) at documents that should be given to new hires when they begin employment with a company:

  1. The new DFEH-185
  2. DE-2511
  3. DE-2515
  4. CA Wage Theft Notice
  5. Workers’ Compensation Notice
  6. Form I-9
  7.  Form W-4

In addition to the forms above, we have previously discussed the importance of having a Non-Disclosure Agreement, Employee Handbook, and Arbitration Agreement.

Employers doing business in California should know that the state takes a dim view of restrictive covenants. But what about the other 49 states? You can find the answer to that question in Fox Rothschild LLP’s newly updated National Survey on Restrictive Covenants. The Survey is provided by our Securities Industry Practice Group and the Labor and Employment Department. You can access a copy here.

Copyright: jorgophotography / 123RF Stock Photo
Copyright: jorgophotography / 123RF Stock Photo

Earlier this week, I was advising a client on the termination of one of their spa employees. During the course of the conversation about his poor performance, the issue of his compensation came up. Turns out, while the termination was completely legitimate and non-discriminatory, we discovered liability for the client based on the employee’s commission-only salary structure and failure to provide meal and paid rest breaks. The next evening, while having my haircut, I raised this compensation structure with my stylist, also a massage therapist at a Southern California spa. Lo and behold, same arrangement.

Yesterday, a judge approved a nearly one million dollar settlement for the Sonoma Mission Inn’s posh Willow Stream Spa to settle a wage and hour, 103-member, class action lawsuit. That doesn’t sound relaxing at all.

Woman with face mask in a spa
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Here are some issues I have seen the past few months that can get spas and salons in trouble:

1) Paying by piecework (e.g. per treatment or service): this implicates AB 1513, which became effective January 2016, and requires compensation for all hours worked during a pay period, including breaks and other “non-productive” time. Many workers on a piece work plan are still not being paid for breaks as required by law. AB 1513 also requires a host of record-keeping obligations.

2) Paying by commission: legally speaking, commission payments are a percentage of sales and should not be paid for services performed. With spa or salon employees, it is arguable whether they really “sell” anything, in which case, a commission structure doesn’t work. Payment by commission requires the terms to be in writing and paid in the pay period they are earned. Employers frequently confuse the piece-rate and commission concepts and wind up in non-compliance.

3) Failing to pay minimum wage or overtime: because of the issues above, some spa workers are not receiving proper minimum wage or overtime payments. At spas where the compensation is a hybrid of compensation schemes, employers must be careful to calculate the regular rate properly.

4) Misclassification: some employers are still classifying therapists and aestheticians as independent contractors in likely violation of CA law. Because these workers are working in the spas at the direction of management, it’s a tough argument to make that such workers are independent contractors and exempt from the issues above.

If you are thinking you need a massage (or stiff drink) after reading this, I’m sure you’re not alone.

California has the most stringent meal and rest break rules in the country. If an employee’s break is not taken within the proper time, is not long enough, or is interrupted, the employer is subject to a one-hour penalty. It’s one thing to impose a penalty on employers for not providing a mandated break. But imposing a penalty because the break is minutes late creates absurd situations.

Copyright: gajus / 123RF Stock Photo
Copyright: gajus / 123RF Stock Photo

Here’s just one example. Nonexempt employees get a 10-minute rest period every four hours or “major fraction thereof.” So an employee who works 10 hours gets two rest periods (plus a meal break). But if the employee works past 10 hours, she becomes entitled to a third rest period. If she isn’t offered it, the employer owes her a one-hour penalty. Suppose the employee goes to her supervisor and says that she worked a bit past the 10-hour mark and she’s ready to go home. The supervisor asks if she’s taken a third rest period and she says “No.” The supervisor then has to offer her a 10-minute rest period. The employee obviously doesn’t want or need a rest period. She’d rather just go home. But if the employer doesn’t offer her the break, it owes her for an additional hour.

Every other jurisdiction manages to see that employees receive breaks without these overly restrictive and punitive provisions. If anything, the situation is getting worse with the recent decision in Augustus v. ABM Security emphasizing that employers must not only “relieve their employees of all duties” during their breaks, but must also “relinquish any control over how employees spend their break time.” So don’t expect the number of class action lawsuits against California employers to decrease anytime soon.

Wages, salaries, and benefits make up a large proportion of costs for most businesses. One way to control these costs is to control how much overtime employees work. In California, nonexempt (i.e. hourly) employees are entitled to one and half times their regular rate of pay when they work more than eight hours in a workday or 40 hours in a workweek. They’re also entitled to time and a half for the first eight hours on the seventh day of work in a workweek. Any work in excess of 12 hours in one workday, or eight hours on the seventh workday in a workweek must be paid at twice the employee’s regular rate of pay.

Some businesses address excessive overtime by telling their workers that they need management approval to work overtime. If they work overtime without approval, however, you still need to pay them for that work. You can counsel them, or even take corrective action for their failure to follow instructions. But you still need to pay them. Employees who aren’t paid for all of their time can claim overtime violations, minimum wage violations (for time they weren’t compensated for), waiting time penalties (up to 30 days pay if they weren’t paid everything they were owed at termination), PAGA penalties, attorneys’ fees, and more. California has no shortage of exorbitant penalties for seemingly minor violations.

Copyright: ximagination / 123RF Stock Photo
Copyright: ximagination / 123RF Stock Photo

Similar problems arise if employees who are forbidden to work overtime feel pressured to work “off the clock.” Take the example of a new nurse who needs to finish charting on his patients before he leaves for the day, but who’s also prohibited from working overtime. If he clocks out to finish his work and the employer knows about it, or reasonably should know about it, the employer needs to pay him for that time. Again, it can counsel him or take corrective action for not following the rules, but it can’t withhold his pay.

Managers working to reduce overtime need to make clear to their workers that they may not work off the clock. And if the managers learn of employees doing so, they need to ensure that they are paid for that time. Controlling overtime is an effective way of controlling costs, but only if you do it right. Do it wrong and you risk losing any possible savings and then some defending wage and hour claims.