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
Copyright: bds / 123RF Stock Photo

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.

Have you ever seen one of those workplace training videos and thought “I could do that?”  Well I did that!

I am excited to be featured in a training video to assist workplace supervisors in recognizing and responding to common legal issues that arise in the day-to-day management of workers.  The video was developed and produced by Kantola Productions and is titled “Employment Laws: What Supervisors Need To Know.”

The video focuses on the decision-making process and provides helpful strategies for ensuring compliance with national workplace laws and regulations, covering topics such as:

  • Accommodation requests
  • Safety concerns
  • Social media and related privacy expectations
  • Wage and hour compliance challenges

The DVD retails for $289 and is available to Fox Rothschild clients and their contacts at a 20% discount.  Please enter Fox20 in the “catalog code” box when filling out the online purchase form.

Take a look at a clip from the video below.  Enjoy!

Preview:

Copyright: Poofy / 123RF Stock Photo
Copyright: Poofy / 123RF Stock Photo

The California Supreme Court has once again deviated from what many view as clear precedent of the U.S. Supreme Court concerning the enforcement of arbitration agreements. Last week, the California court decided McGill v. Citibank, N.A., holding that state “public policy” precludes the enforcement of arbitration agreements where a class sues for “public injunctive relief” under Business and Professions Code § 17200, California’s much abused “unfair competition” statute. This decision comes on the heels of Iskanian v. CLS, in which the California court held that a class waiver in an arbitration agreement was unenforceable to prevent a representative action under the Private Attorneys General Act, again citing “public policy.” The McGill and Iskanian decisions are at odds with recent SCOTUS opinions such as ATT Mobility v. Concepcion, and American Express Co. v. Italian Colors. In the Italian Colors case, the high court specifically rejected state “public policy” as any kind of exception to the sweeping preemption of the Federal Arbitration Act (“FAA”).

California has been in a running dog fight with the FAA since 1987. In that year, SCOTUS decided Perry v. Thomas, in which Justice Thurgood Marshal upheld the FAA under the Commerce and Supremacy clauses, and slapped down California’s attempt to undermine arbitration agreements. Thirty years later, California courts remain determined to block arbitration under PAGA and Section 17200 in the face of otherwise enforceable arbitration agreements.

Also, with today’s swearing in of Neil Gorsuch, SCOTUS returned to its full complement of nine justices. Look for the high court to grant review of California and Ninth Circuit cases that follow McGill and Iskanian in the next couple of years with an eye toward overturning those decisions. In the meantime, companies should continue to include waivers of class and representative actions in their arbitration agreements with consumers and employees, noting that the waivers are enforceable to the extent permitted by applicable law.

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 innovative minds in the hospitality industry.  Here is my annual top ten list of take-aways:

  1. While no one knows what will happen under the Trump Administration, some common assumptions include:  Less active Department of Labor and NLRB (especially as to non-union work forces ); EEOC likely to apply current law to egregious situations, but not expand it
  2. That said, states like California will pick up the slack, so California employers should not expect any decrease in claims or lawsuits
  3. One of labor’s biggest concerns about the Trump Administration is the shift in courts; there are 117 vacant federal court vacancies, which means a lot of conservative judges could be appointed and rule in a more business-friendly way
  4. A less powerful NLRB may mean more corporate campaigns, and with that may come more RICO lawsuits to challenge them
  5. How hotels treat their Sales Managers (whether exempt or non-exempt) is still all over the map, although the trend is certainly towards classifying lower level sales and catering managers as non-exempt
  6. Employees are focused on more than just compensation and benefits; renewed focus on culture, recognition and development
  7. Benchmarking is only part of the equation, because if you pay the median, you can’t differentiate from others and get the best candidates
  8. Acknowledging that many millennials move on after a few years, many recruiting efforts now focus on alumni re-recruiting, which changes the off-boarding process and the attitudes towards employees who leave
  9. Automation is a hot topic in hospitality, but companies need to balance guest experience with efficiency; Human Resources should embrace technology to free up time to focus on people, not mundane tasks
  10. Anticipate trend to de-regulate tip pooling so that more employees can participate without such archaic restrictions on back of the house and time spent touching tables

I am heading to Las Vegas for the annual Cornell HR in Hospitality Conference, from March 27-29th.  I am particularly excited for the session on Hospitality Included – One Year In, featuring my partner, Carolyn Richmond, who Co-Chairs our Hospitality Practice Group and practices in New York. Carolyn is also presenting on two wage-and-hour issues: The “Unconference”: FLSA Legal Think Tank and The New Wage and Hour Regulations.

Cornell HR in Hospitality Conference

I will be participating in the 8th Annual Cornell University Executive Summit on Wednesday, where I get to debate the most topical HR issues facing hospitality today with other employment law attorneys and top executives. Stay tuned for my annual top ten lessons learned from the Conference.

I hope to see you there!

 

Yes, I am still obsessed about all things Uber these days.  That said, I have been ruminating over one development last week that just didn’t sit right with me.

On the one hand, I know firsthand how that bro-centric culture can be devastating.  Just a few years ago I knew a young woman working in tech.  She had just spent two years in a management training program and earned a coveted placement in her first choice department working for a very well-regarded young manager.  One late night at work he confessed that he was totally attracted to her, and very distracted by it.  He then began to text her very personal messages.  She was horrified.  Didn’t know what to do.  Wondered if she had done something wrong.  I advised her to talk to HR and to document that discussion to protect herself from retaliation.  HR was empathetic and asked her what she wanted to do.  She wanted to stay in the role (moving just after she just got the job would have been impossible to explain).  But the creepy unwanted attention had to stop.  Presumably the manager was counseled, and she stayed.  But then he essentially froze her out.  Only talked to the men on the team.  She felt like an outcast, and shortly thereafter, quit for a better job.

Let’s also be clear, if even 10% of what the former employees at Uber are saying is true, then Uber has quite a problem.  The more recent account was particularly upsetting.

All of that said, being a lawyer trains you to see both sides to every story.  I have often seen employees take one situation that has a kernel of truth, and spin it wildly into a much more elaborate story than it actually was.  I have seen careers (typically of men) ruined by allegations.

That brings me back to Uber.  News reports last week stated that a senior executive was asked by the CEO to resign when it was uncovered that he had left his former employer amid harassment allegations.  He apparently had not told Uber when hired, and now, given the investigation and the press, it was better for Uber that he resign.  What’s wrong with this picture?

Employee termination
Copyright: ljupco / 123RF Stock Photo

For me (and not knowing anything other than the news reports), it just didn’t sit right.  An allegation is just that.  Just like being arrested does not mean the person committed a crime.  Nothing has been proven.  And there was no report of anything this executive did wrong at Uber, just what he may have done wrong at a prior employer.  Nor was there any report of any misrepresentations he made to get hired.  Remember, an applicant is not required to disclose allegations against him to future employers.

So here’s a tip for you:  Ask your applicants if they were ever terminated or asked to resign in lieu of termination.  Or better yet, put that question on your employment application.  Any later discovered misrepresentation to that direct question would certainly be a problem.  But if that question wasn’t asked, is it right for someone to be forced out?

Scapegoating is a quick answer to a much deeper problem.  I don’t want us to assume all men in tech are bad eggs or label them all as harassers.  Let’s have some due process for all people accused of policy violations.  As I explained here, due process starts with an unbiased investigation.  And then, if after a fair investigation, someone is found to have used poor judgment or violated a policy, then that person should be let go.  A witch hunt is not the answer.

Copyright: maxxyustas / 123RF Stock Photo
Copyright: maxxyustas / 123RF Stock Photo

It starts with an e-mail from upper management asking for employee data or payroll records. Wanting to demonstrate that he’s diligent and responsive, a well-meaning HR or payroll person promptly sends off the requested information. Unfortunately, despite appearances, the e-mail is not from upper management. It’s from a crook trying to run a “phishing” or “spear phishing” scam. So the employee eager to show himself as diligent and responsive ends up looking gullible and a liability to the organization. That’s probably not the impression he was trying to make.

My partner (and our firm’s Chief Privacy Officer) Mark McCreary and our colleague Kevin P. Dermody have written this very informative Alert on the topic. It explains the problem in more detail, gives examples of scams, and discusses what employers can do to protect themselves. If you want to follow the topic more closely, you can also subscribe to our Privacy Compliance & Data Security blog.

Hundreds of employers of all sizes have been victimized by these scams. Don’t let your company be next.

Investigating a harassment complaint is not rocket science, yet as the recent news from Uber illustrates, there are many ways for employers to mess it up.

Investigation and technology
Copyright: imagecatalogue / 123RF Stock Photo

The first step is to gather sufficient details to understand the scope of the issue.  Former Uber employee Susan Fowler’s viral blog post certainly did that, and the CEO, Travis Kalanick, apparently got an earful at his all-hands meeting last week.

Once the gravity of the issue is known, the next step is to devise an investigation plan, and figure out who should conduct the investigation.  Sometimes it makes sense to use the company’s internal HR department.  Yet, when higher levels of management are involved, or there is an alleged systemic problem, the HR department is not the best choice.  In fact, they may be part of the problem.

Sometimes it makes sense to go to a trusted outside advisor or law firm, especially when that advisor knows the company, its culture, and the management team.  There is less ramp up time to understand the players at issue, as well as the company’s dynamics and policies.  This seems to have been Uber’s approach in appointing Eric Holder and his law firm to investigate last week, along with oversight by board member, Ariana Huffington, and the new internal Head of HR.

But alas, that is a problem too.  The investigator must be perceived as unbiased and independent.  The investigator must be someone employees trust and are not afraid to talk to.  Retaliation is a real concern for employees.  If the investigator or his firm is seen as too close to management, then employees may not speak fully and honestly, thereby undermining the investigative process.  This very issue seems to be what two of Uber’s investors were concerned about when they wrote that they were “disappointed” that Uber “chose a group of insiders to conduct the probe.”  While some oversight by a designated board member, and the current head of HR often makes sense, in this case, it is viewed by some (including the two investors) as “an example of Uber’s continued unwillingness to be open, transparent, and direct.”

In fairness to Holder and his law firm, they may very well be independent.  But appearances matter, and for the past week, the optics for Uber are not looking good, and the persistent fallout has not abated.

The lesson here is when a complaint comes in, it is critical to assess the issue and carefully plan the investigation.  Decisions about who should conduct it, and who the investigator will report to and work with at the company during the investigation as it evolves and expands, are just as important as taking prompt action.  A mistake at this early juncture can taint the whole process.

Hopefully for Uber, that will not be the case.  As the investors’ letter states, this “will be defining for the company, so the stakes are high to get it right.”  Time will tell.  To be continued …