Employment Law Observer

California Employment Law Report

2007-05-23T17:59:00.001-07:00

For updates on California employment law, visit the California Employment Law Report at www.employmentlawreport.com.

California Supreme Court Holds Corporate Officer's and Director's Personal Assets Are Not Open To Plaintiffs in Wage and Hour Lawsuits

2005-08-19T14:12:00.000-07:00

On August 11, 2005, the California Supreme Court held that California's labor statutes do not impose personal liability on corporate officers and directors for unpaid wages owed by a corporate employer. (The case is Reynolds v. Bement - view the decision in PDF or WORD)

Plaintiff Steven Reynolds brought the action against Earl Scheib, Inc. and various other individual defendants who are shareholders of the corporation. Plaintiff alleged that the defendants misclassified the Shop Managers as exempt employees to deprive them of "statutory overtime compensation in order to maximize defendants' profits and income."

Plaintiff argued that he could attempt to recover the alleged unpaid wages by personally suing the individual defendants. Plaintiff argued that the Industrial Welfare Commission (IWC), which has authority to promulgate regulations (a.k.a. wage orders) regarding employment within California, has defined employer to mean:

an individual who "exercises control over the wages, hours, or working conditions of any person." (Wage Order No. 9, subd. 2(F) (hereafter the IWC employer definition).)

While this definition encompasses corporate shareholders and policy makers, the California Labor code fails to define "employer" (which seems to be a glaring omission by the California legislature - but now they are on notice to correct the issue). The Supreme Court stated:

Noting that section 510, in obligating "an employer" to pay overtime compensation, does not define that term, and that section 1194, in providing "any employee" with a private right of action to recover unpaid minimum or overtime wages, does not specify potential defendants, plaintiff argues we should apply the IWC employer definition in order to determine who are proper defendants here. That definition, plaintiff asserts, includes corporate control figures like the individual defendants.

The Supreme Court refused to accept Plaintiff's proposition to "infer" that the IWC definition applies to the Labor Code and instead held (in a rare example of judicial restraint by the California Supreme Court) that since the Labor Code does not define the term, it must look to the common law definition of employer. While leaving the common law definition of employer unexamined, the Court held that "[u]nder the common law, corporate agents acting within the scope of their agency are not personally liable for the corporate employer's failture to pay its employee's wages."

It is important to note, however, that plaintiffs can still recovery penalties pursuant to Labor Code section 558 from individual shareholders personally. Section 558 provides:

Any employer or other person acting on behalf of an employer who violates...any provision regulating hours and days of work in any order of the [IWC] shall be subject to a civil penalty as follows: (1) For any initial violation, fifty dollars ($50) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages. (2) For each subsequent violation, one hundred dollars ($100) for each underpaid employee for each pay period for which the employee was underpaid in addition to an amount sufficient to recover underpaid wages.

And, as the Court noted, if the Plaintiff is successulf in alleding an alter ego theory against the corporation, the company owners/sharholds will be personally liable.

Recent California Supreme Court Ruling Does NOT Place "Attractiveness" in a Protected Category, But it Does Require Employers to be Mind Readers

2005-08-17T11:47:00.000-07:00

In a recent decision by the California Supreme Court (Yanowitz v. L'Oreal), the Court held that employers are liable for retaliation if the employee reasonably believes the employer's conduct violated the California Fair Employment and Housing Act (FEHA) even if: (1) the employer did not violate FEHA; and (2) the employee "does not explicitly state to her supervisor or employer that [the employee] believes the order to be discriminatory." In summary, the Court now requires employers to be mind readers.

While many are reading this case as establishing a protected category for "attractiveness" the Court does not go that far (or depending on your perspective- is not that limited). It basically states that if an employee believes that an order or conduct of his/her employer (in this case the employer told the employee to fire a sales person because she was "not good looking enough" and to "[g]et me somebody hot) is discriminatory - even though under the law it is not - and the employee complains or puts the employer on notice that he or she believes the conduct to be discriminatory, the employee can have a claim for retaliation.

In this case, the plaintiff claims she complained of sexual harassment when she questioned her supervisor's request to terminate the sales associate for somebody more attractive. The plaintiff said that after she did not fire the sales associate, her supervisor asked why this had not been done yet, and she responded that her supervisor needed to give her "adequate justification" for firing the sales associate.

Justice Chin, who disagreed with the Court's ruling, wrote in his dissenting opinion that:

She [the plaintiff] never mentioned to anyone within the company that she felt the order was discriminatory. She never explained, or even alluded to, what she articulated in her declaration that "[t]his was the first time in all of my years as Regional Sales Manager that anybody had ever asked me to make a final employment decision based upon the physical appearance, much less the subjective physical appearance, of an employee." She kept her belief, and all of the reasons she allegedly had for that belief, entirely to herself.

The majority claims that plaintiff's statement to Wiswall [plaintiff's supervisor] that she needed justification presents a prima facie case that she complained of unlawful sex discrimination. This statement, however, was not a claim of discrimination at all, much less sex discrimination. As L'Oreal aptly points out, a manager's request for "adequate justification" from a superior could convey reservations about the wisdom or soundness of the superior's directive from a business standpoint - why seek the removal of a salesperson who (the manager believes) is doing a good job? Why needlessly risk antagonizing the important account employing the salesperson? The manager may simply be reluctant to carry out an unpleasant task directed at a person the manager personally likes or respects. Or perhaps she simply thinks the directive is unfair.

All of these are very logical possibilities that have nothing to do with sex discrimination or discrimination of any kind. Indeed, plaintiff herself indicates in her declaration she believed the order was a bad business decision because the salesperson in question was a top performer - information that she also apparently kept to herself. Plaintiff's mere request for justification is even further removed from a complaint of discrimination than those found too vague in the cases cited above. She did not come close to making "an overt stand against suspected illegal discriminatory action." Nor did she even give Wiswall, or anyone within L'Oreal, "sufficient facts from which he could conclude that plaintiff's problem involved sex discrimination. At most, she "was contesting the correctness of a decision made by [her] employer," which is insufficient. (citations omitted)

Basically, employers now need to read employees' minds regarding whether an action they have taken is believed by the employee to be in violation of the law and if the employee does not specifically say that they believe the action is in violation of the law, the employer still needs to examine the employee's mannerisms to extrapolate whether the employee subjectively believes the employer violated the law. Justice Chin, again, makes a good point in his dissent: "It makes no sense to hold both that the conduct need not be unlawful and that the plaintiff need not complain of it."

The Court also clarified two other technical aspects of sexual harassment law: (1) the Court held that the proper standard for defining an adverse employment action is the "materiality" test, as opposed to the "deterrence" test; and (2) the "continuing violation" doctrine is applicable to retaliation claims and courts may consider the totality of circumstances (including violations that allegedly occurred outside of the statute of limitations period).

Yanowitz will have a dramatic effect on employers within California. Justice Chin appropriately concluded his dissent by stating: "The FEHA's purpose is to prevent discrimination, not to encourage employees to generate lawsuits quietly. The majority encourages the generation of stealth lawsuits but does nothing to further the purpose of the retaliation cause of action or the FEHA itself."

Employment Law Meets Blogging

2005-08-08T18:08:00.000-07:00

Employment lawyers across the nation will see the increase in popularity of blogs as another opportunity to "sell" business owners and companies on establishing a "blog policy." Employers need not jump at every new technological development (or any other development for that matter) and establish a new policy that is as confusing as the other hundred or so policies the company already has in place. But the discussion of establishing a blogging policy is a good reminder of policies that employers should have (and hopefully are well drafted to already cover issues like blogging).

MSN published a great article about whether employees can be fired for blogging (click here for the article). Also, many blogs picked up a story about a Delta Air Lines flight attendant who was fired when the company found "inappropriate" pictures of her in her uniform posted on her blog.

Contrary to the hype blogs have recently received, blogs are not a vastly new means for employees to publish information about their employers - people seem to forget that web-sites have been around for 10 years now. If a company did not have a policy regarding employee web-sites - why would it now need a policy on employee blogs?

Employer's policies should be well drafted and give the employees an overview of what type of behavior - during and off work is expected of them. Remember, employers cannot control employee's behavior when they are not at work, but employers usually can terminate/discipline employees for posting negative information about the company (or company trade secrets) on the internet even if the employee posted the negative information on their own time from their home computer. The term "usually can" is used in the previous sentence because employers must be careful not to terminate employee's because they have "blown the whistle" about the company's possible violation of laws - this could set the company up for a wrongful termination lawsuit. In addition, California law protects employees' rights to certain communications. For example, Labor Code section 232 prohibits employers from discharging, disciplining or discriminating against employees who disclose the amount of his or her wages. Furthermore, courts have also said that the National Labor Relations Act (NLRA) protects certain employee activity, including participating in a group discussion about the fairness of compensation (note that employees do not have to be a member of a union to have protection of the NLRA).

Employers should review their current policies to make sure that the policy complies with the law and provides the employees with notice of what is appropriate behavior and what is not. However, employers should consult an attorney before implementing such a policy to avoid potential pitfalls.

I know you are now curious to see the pictures that Delta felt were inappropriate. If so, click here.

Dr. Lee Humor

2005-08-08T18:01:00.000-07:00

In brining some humor to Microsoft's attempt to prevent its former executive Dr. Lee from working at Google for the next year, WebProNews suggests that Dr. Lee fill an open "executive chef" position listed on Google's "open positions" postings. They also note that Dr. Lee is not one for idle time:

Give the man credit. When stuck for a way to finish his grad paper on speech recognition, he took a year off to write a world-champion Othello program. Then came back and knocked off that pesky paper to earn his doctorate.

That's a geek hero if there ever was one. All he needs is a Persian cat and a monocle and he could take over the world. Hey Doc, if you're not going to be busy for the next few months, why not stop by the WebProNews offices? We'd like to see if you're as good at backgammon as you are at Othello.

Small and Medium Sized Business Owners' New Job Requirement: Being Deposed (Items You Should Know About Being Deposed)

2005-08-02T14:28:00.000-07:00

As a recent Wall Street Journal mentioned, a deposition is becoming a “rite of passage for ambitious managers,” and I would suggest that this applies to successful small to medium sized business owners as well. Small or medium sized business owners often do not have the barrier between them and litigation filed against their business that executives in large companies usually have. Courts just do not seem to understand that a fortune 500 executive’s time is just as scarce as is a small business owner’s time who employs 10 to 20 people. Be it as it may, small to medium sized business owners will often find themselves being deposed in litigation covering a breach of contract claim with a supplier to an employment litigation claim filed by a former employee - and they cannot prevent this from happening, but they can prepare for it. Here is a brief list of what to expect and some items to keep in mind when you are deposed:

1. Keep answers to either a simple “yes” or “no,” if possible. The more you talk, the more questions the opposing attorney is going to through follow-up questions. The more you talk the greater the chance that you will say something the opposing counsel and use against you. The deposition is not your time to tell your side of the story - your attorney will give you your opportunity to do this under better circumstances (such as through motions or through a sworn declaration signed by you).

2. Prepare before the deposition. Review the relevant documents with your attorney. Discuss legal theories with your attorney and get an understanding of the law so that you have an overview of your case.

3. Take breaks often. Even thought it feels like an interrogation, it is not. You are free to take a break at any time during the deposition, no matter what opposing counsel tells you. Note: It hurts your credibility if it looks like you have to discuss your answer with your lawyer before you answer a question - so sometimes your lawyer will tell you not to take a break while a question is pending (see item #7 below.)

4. Remain calm. Opposing counsel will probably use multiple tricks to try to get you to talk. They will try being your friend (see item # 5) and they will try to get you to lose your temper - all in a calculated effort to get you to lower your guard and say something that will hurt your case. Remember, everything opposing counsel does is calculated - therefore every answer and emotion you have should also be under control and calculated.

5. Remember - no matter how nice opposing counsel is to you, he or she is not your friend and only wants your money.

6. You are never truly “off the record” - even when you are in the bathroom. A court reporter will be present during the deposition, and attorneys will resume the deposition by saying “back on the record” and in the same way stop the deposition by saying “off the record.” Even though you are “off the record,” do not talk about the case at all (in fact, do not talk at all - any thing you talk about - your family, what you did over the weekend - may have some relevance to your case and you do not want to provide opposing counsel with this “free” information). Even if you are only talking to your attorney, but others are present, the fact that others can hear your discussion will usually not make those communications confidential or protected by the attorney-client privilege.

7. Always follow your attorney’s advice. You are paying good money to have him or her present, so follow the instructions he or she gives you during a deposition. If you disagree with your attorney, wait until a break and raise the issue with him or her outside of opposing counsel’s present.

8. Be truthful. It is especially hard today to expect to cover up a “bad fact” by lying about it given all of the different ways our actions are recorded throughout the day via emails, voicemails, building security tapes and records, etc…. And when the opposing counsel discovers your lie, it will embolden their efforts and destroy your credibility.

Judge Grants Microsoft Injunction In Washington State Court

2005-07-29T11:09:00.000-07:00

At yesterday's hearing, Washington state Superior Court Judge Steven Gonzalez granted a temporary restraining order preventing Kai-Fu Lee from working at Google on any product, service or project similar to those he worked on at Microsoft, including Internet and desktop search technology. (click here for article)

Google requested that Microsoft provide it with a more specific list of items that Dr. Lee is precluded from working on. Microsoft agreed to provide the list by Monday. However, Microsoft has to be careful to not make the list too broad, because Google will likely run into the Santa Clara, California court and waive the list before the court claiming that it violates California law and effectively prevents Dr. Lee from earning a living.

Another note, I have not seen Google make the argument that Microsoft's non-compete agreement is too broad because it is not limited to a geographic area. Google could make the argument that Microsoft is not really trying to prevent Dr. Lee from disclosing trade secrets (which are covered by law), but rather prevent Dr. Lee from using his acquired experience. Dr. Lee's experience and skills are probably so unique that he cannot work at any other job except for a company that is in direct competition with Microsoft. Therefore, Google could argue that Microsoft's non-compete agreement is void because it prevents Dr. Lee from working anywhere in the world for one year.

Furthermore, in California, if a court finds that the non-compete agreement to be overbroad, the court will strike the entire agreement as opposed to refining the agreement to bring it into compliance with California law.

Google Counters and Microsoft Files For Restraining Order

2005-07-28T14:56:00.000-07:00

On July 25, 2005, Microsoft filed a Motion for Temporary Restraining Order in Washington state court to “prevent the actual and substantial injury that will result if Dr. Lee is allowed to violate his non-competition promises.” Dr. Kai-Fu Lee worked at Microsoft’s Chinese Research facility for two years. In 2000, Dr. Lee was promoted to Vice President of the Natural Interactive Services Division within Microsoft in the United States. On August 8, 2000, Dr. Lee signed an Employment Agreement with Microsoft. The non-competition agreement provided in relevant parts that:

Non-Competition and Non-Solicitation. While employed at Microsoft and for a period of one year thereafter, I will not (a) accept employment or engage in activities competitive with products, services or projects (including actual or demonstrably anticipated research or development) on which I worked or about which I learned confidential or propriety information or trade secrets while employed at Microsoft…. If during or after my employment with Microsoft I seek work elsewhere, I will provide a copy of this Agreement to any persons or entities by whom I am seeking to be hired before accepting employment with or engagement by them.

In arguing for the temporary restraining order, Microsoft argued that this restriction would be no greater than necessary to protect Microsoft’s legitimate business interests, the Agreement imposes no undue burden on Dr. Lee or the public, and that if Dr. Lee is not stopped, Microsoft will suffer actual and substantial injury. Google countered by stating that the non-compete agreement is unreasonable because it would bar Dr. Lee from working “anywhere in the software industry, for a full year.” The hearing was set to take place today.

Google’s California Complaint for Declaratory Relief:

In an attempt to gain an advantage over the litigation, Google brought a Complaint for Declaratory Relief in the Superior Court of Santa Clara on July 21, 2005. The complaint attempts to “seek judicial relief from an overreaching and unlawful non-compete provision drafted by defendant Microsoft Corporation.” Google contends that California’s Business and Professions Code section 16600, which invalidates any contract that restrains anyone from “engaging in a lawful profession, trade, or business of any kind….”

Google, however, has an uphill battle in persuading a California court that this case should be heard in California. Dr. Lee signed the non-compete agreement in Washington, the non-compete has a provision that states that it is governed by the law of the State of Washington and the agreement provides for venue in a state or federal court located in King County, Washington. Google argues in its motion that:

The laws of the State of Washington relating to contract provisions such as the
Covenant Not to Compete are in fundamental conflict with California law. The
State of California has a materially greater interest than the State of
Washington in having its law applied to decide the enforceability of the
Covenant Not to Compete (a) because of the strong public policy in California in
favor of free mobility of employees and against provisions restraining anyone
from engaging in any lawful profession, trade, or business, and (b) because the
Covenant Not to Compete is interfering with the California-based employment
relationship between Google and Dr. Lee.

It is all from certain what a California judge could find persuasive, but Google’s best argument (and one which they make) is that Microsoft’s Washington state non-competition contracts are now having an effect on California businesses and its residents, and that California’s courts are more “enlightened” than other courts in their approach to non-competition agreements. If the California court accepts this argument it could have dramatic effects on the enforceability of non-compete agreements across the United States. (In fact, a California court has held that California law applies to the enforceability of a noncompetition agreement between a Maryland-based employer and an employee who was recruited to work in California but was not a California resident.) Note to every employee who has a non-compete agreement: Move to California, get a California driver’s license, move your cat and dog to California, and then magically you may not be bound by your noncompete agreement under another state’s laws.

It is also interesting to note that Google’s complaint does not mention that Microsoft has already filed suit in Washington state to enforce the non-competition agreement. The fact that Microsoft beat Google to the courthouse could have a very dramatic effect on the outcome of this litigation. The fact that there is already a pending lawsuit on the exact same issue in another state could bar a California court from hearing the case. (Note: Microsoft anticipated Google’s attempt to move the litigation to California by filing a complaint for declaratory relief in California, and that is why Microsoft did not even let Dr. Lee leave the meeting in which he was terminated before it served him a copy of the lawsuit filed in Washington state.)

Different reports have speculated that Google is positioning itself to compete directly against Microsoft, and not only in search engine technology but also within desktop software. A review of the Google job openings evidences this. Google has been raiding Microsoft’s talent for some time now, and this lawsuit is a shot across Google’s bow (and other start up companies) that the talent can leave, but Microsoft has the resources to make it an expensive ordeal.

In the larger perspective, Microsoft’s attempt to prevent Dr. Lee from working at Google will not effect the two companies much. It is likely that the litigation will not be resolved within one year, which is the same time Dr. Lee is restricted to work for a competitor under the non-compete agreement. In this case, both companies are large and it would be difficult to see how one person, such as Dr. Lee could make a significant difference, at least within the short term, on either company’s China strategies. However, Microsoft has sent an effective message to smaller companies that do not have the resources to fight a legal battle in two different state courts.

Google and Microsoft Battle Over Non-Competition Agreement

2005-07-22T15:29:00.000-07:00

Microsoft filed suit against Google Inc. and a former Microsoft vice president, Kai-Fu Lee, an expert in search engine technology on July 20, 2005.
The suit was filed in King County Superior Court in Seattle. Google announced the day before the suit was filed that it had hired Dr. Lee and named him president of its China operations.
On July 21, 2005, Google answered Microsoft's lawsuit by filing a suit of its own in California Superior Court in Santa Clara seeking declaratory relief from the noncompetition agreement Microsoft is attempting to enforce in the Seattle court. It is likely that this move was an attempt by Google to move the case into the California courts, which take a strong position against the enforceability of noncompetition agreements.
The Employment Law Observer will continue to follow the lawsuit as it develops.

Supervisor's Affairs In The Workplace Create Hostile Work Environment For Other Women

2005-07-19T15:20:00.000-07:00

In a drastic holding today by the California Supreme Court, California employers now face liability from co-workers of employees who are romantically involved with their supervisors. The Sacramento Bee reported:

The case was brought by two former workers at the Valley State Prison for Women in Chowchilla who said their jobs became intolerable after prison warden Lewis Kuykendall became sexually involved with three female staff members, who received favorable job assignments and promotions.

In ruling that the two plaintiffs, both women, could claim they were harassed, the court determined that consensual workplace relationships can rise to the level of a hostile work environment when "the demeaning message is conveyed to female employees that they are viewed by management as 'sexual playthings' " - or when employees perceive that women must have a sexual relationship with a supervisor to get ahead.

But the court's ruling appeared to establish an almost numeric standard for when such messages are conveyed. In its ruling, the court distinguished between a single, isolated affair between a boss and employee that normally would not constitute sexual harassment and what it called "widespread" sexual favoritism.

An attorney for the plaintiffs was thrilled by the ruling. "This says you don't have to be the subject of unwanted sexual advances to show there was a hostile work environment," said lawyer Barbara Lawless.

While it appears that this particular case is unique with its facts, the ruling could open yet another avenue potential plaintiffs may use to bring lawsuits. The California Supreme Court announced this ruling today, and the Employment Law Observer will post more information about the potential effects it may have on California employers soon.

Politics In The Workplace

2005-07-14T14:14:00.000-07:00

The California Chamber of Commerce recently published guidelines for political communications between employers and employees. The Chamber recommends that employers can:

"Communicate with your employees, stockholders and their families about the ocmpany's support of or opposition to state legislation, regulation or ballot measures."

But employers cannot:

"Control or direct the political activities of your employees 'through or by means of threat of discharge or loss of employment.'"

The guidelines also recommend that employers cannot communicate political messages to employees through paycheck stuffers. The guidelines also set out what employers must report what they spend as political contributions and for lobbying. To view the California Chamber of Commerce guidelines, click here.

Sexual Harassment Training Required for Supervisors

2005-07-07T17:16:00.000-07:00

Supervisory employees employed as of July 1, 2005 must be given two hours of sexual harassment training by the deadline of January 1, 2006. Governor Schwarzenegger signed a bill, AB 1825, which requires all California employers with 50 or more employees to provide two hours of sexual harassment training to all supervisors once every two years. However, employers who have already provided sexual harassment training to their supervisory employees after January 1, 2003, do not need to comply with the January 1, 2006 deadline. Any “new supervisory employees” must be given two hours of sexual harassment training within six months of beginning their supervisory position. Thereafter, employers are required to give their supervisory employees the sexual harassment training once every two years. To the extent there is a question of whether or not an individual qualifies as a supervisor, employers should err on the side of caution and provide the sexual harassment training. Under other California statutes and case law, the term “supervisor,” has been defined very broadly. See e.g., Gov’t Code § 12926(r).

The training must consist of “information and practical guidance regarding the federal and state statutory provisions concerning the prohibition against and the prevention and correction of sexual harassment and the remedies available to victims of sexual harassment.” Training should include practical examples aimed at instructing supervisors in the prevention of harassment. Those who provide the training must have “knowledge and expertise in the prevention of harassment, discrimination and retaliation.”

Failure to provide the training does not, in and of itself, result in strict liability for the employer in the event an employer is sued for sexual harassment. While the specific statutory penalty only consists of an order from the FEHC to comply, questions abound as to the legal effect of noncompliance in areas such as negligence, failure to take reasonable steps to prevent harassment, representative action liability under Business and Professions Code § 17200 claims. Whether or not such an argument would prevail is currently unclear and will be decided by the courts.

Employer's Liability Under Labor Code Section 226.7 Is Reduced

2005-06-28T14:05:00.000-07:00

In a recent published decision, the California Labor Commissioner held that payments provided for under Labor Code section 226.7 for missed meal and rest breaks is a penalty and not a wage. This is a favorable ruling for employers in California which settles a long undecided issue over Section 226.7, which provides that employees are entitled to one additional hour of pay at the employee’s regular rate of pay for each day the employee does not receive a meal or rest period. By holding that the payment provide for under Section 226.7 is a penalty, the Labor Commissioner shortened the time period for which employees can seek Section 226.7 damages from three years to one year. The Code of Civil Procedure section 338 provides for a three year statute of limitations period for the recovery of wages. However, under the Labor Commissioner’s recent holding that Section 226.7 damages are a penalty, employees are limited to a one year statute of limitations period under Code of Civil Procedure section 340. The Labor Commissioner’s holding effectively reduces a Plaintiff’s damages under Section 226.7 by two-thirds.

The case is Hartwig v. Orchard Commercial, Inc., Case No. 12-569901RB. This case has been made public and is binding on any hearing before a Deputy Labor Commissioner or Hearing Officer. To view the Labor Commisioner's ruling, click here.

Contesting Employee's Unemployment Insurance

2005-06-15T18:39:00.000-07:00

Question: I recently terminated an employee for poor performance, and the former employee has now filed for unemployment benefits. Should I fight the claim?

Answer: Unemployment benefits are designed to be a safety net to tide employees over between jobs. In California, an employee is generally presumed to be eligible for benefits. An employer can counter that presumption by showing that (1) the employee voluntarily quit employment without good cause, or (2) the employee was discharged for misconduct. Misconduct does not mean incompetence, negligence, or good faith errors in judgment. Misconduct means a willful or wanton disregard of an important duty to the employer, which disregards and injures the employer’s interests. Put another way, your employee must intentionally do something very bad in order to be disqualified from benefits. Thus, unless the employee does something egregious like steal or bring a weapon to work, more often than not the employee will prevail on a claim for unemployment benefits.

However, there is more to consider than merely whether you are likely to win or lose. Before deciding whether to fight an unemployment claim, you should assess several factors. On the plus side, if you win, your unemployment insurance account will not be affected. If you win, it may also discourage the employee from filing other, more dangerous claims against you.

On the negative side, even if you win, you may antagonize the employee and generate additional claims against you, such as discrimination claims or claims for unpaid overtime. Even if these claims have no merit, they will cost much more to fight than the unemployment benefits would have cost. Also, any statements you make in the course of fighting the claim could come back to bite you in any future litigation. In addition, if you fight the unemployment claim and lose, you may inspire the employee to file additional claims. Employees generally do not understand that while the employee gets the benefit of the doubt on an unemployment claim, on most other claims the employer is “presumed innocent until proven guilty.” Thus, a successful unemployment claim may make the employee think that the legal system offers easy money and generate additional claims.

If you decide not to contest an unemployment claim, you will not antagonize the employee, and the employee will receive a little money to help them through until the next job. This may allow the employee to move on with his or her life, rather than seeking revenge against you. Often, therefore, it will ultimately be more beneficial to allow an undeserving employee to obtain benefits than to fight every claim as a matter of principle.

New Form I-9 Available for Employers

2005-06-15T13:01:00.000-07:00

The United States Customs and Immigrations Service (USCIS) has recently published the new Form I-9, Employment Eligibility Verification. Employers can download the new form at the USCIS website. Employers are required to complete a Form I-9 within three business days of hiring a new employee and are required to retain the forms for three years post-hire or one year after termination of employment, whichever is longer (click here for other time periods for retaining employment documents). Employers are required to use this new form by January 2006, but can begin using it before that time.

Employer's Liability For A Contractor's Labor Code Violations

2005-06-10T11:01:00.000-07:00

Although Labor Code section 2810 quietly went into effect on January 1, 2004 and does not appear to have caused much alarm during the last year, its significance to certain industries or employers who routinely use contractors will not go unnoticed for long.

The law prohibits persons or entities from entering into contracts or agreements for labor or services with a construction, farm labor, garment, janitorial, or security guard contractor where the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided. An employee who is aggrieved by a violation of the law may file an action for damages to recover the greater of all of his or her actual damages or $250 per employee per violation for an initial violation and $1000 per employee for each subsequent violation. Upon prevailing in an action, the employee also may recover costs and reasonable attorney’s fees.

In essence, the law holds entities strictly liable for their contractors’ and subcontractors’ compliance with applicable laws, including those affecting wages and hours, safety, benefits, civil rights, and workplace conduct, among others. An aggrieved employee no longer needs to prove that the person or entity jointly employed him or her, along with his or her direct employer, in order to collect damages from the person or entity for its contractors’ violations of the law.

The breadth of the duty created by this law is startling. For purposes of the statute, the term “knows” includes but is not limited to “knowledge, arising from familiarity with the normal facts and circumstances of the business activity engaged in, that the contract or agreement does not include funds sufficient to allow the contractor to comply with applicable laws.” The phrase “should know” includes, but is not limited to, “knowledge of any additional facts or information that would make a reasonably prudent person undertake to inquire whether, taken together, the contract or agreement contains sufficient funds to allow the contractor to comply with applicable laws.” In addition, the law provides that a failure by a person or entity to request or obtain any information from the contractor that is required by any applicable statute or by the contract or agreement between them, constitutes knowledge of that information. Thus, contractors cannot claim “hear no evil, see no evil” as a defense.

There are two minor exceptions to the law. Persons or entities who execute a collective bargaining agreement covering the workers employed under the contract or agreement and persons who enter into a contract or agreement for labor or services to be performed on their home residences (provided that a family member resides in the residence for at least a part of the year) are excepted from the law.

For the vast majority of entities that are not excepted from the law, there is a safe harbor provision. There is a rebuttable presumption affecting the burden of proof that there has been no violation of the law where the contract or agreement meets certain requirements. A contract or agreement with a construction, farm labor, garment, janitorial or security guard contractor for labor or services must be in writing, in a single document, and contain the following provisions:

The name, address, and telephone number of the person or entity and the contractor through whom the labor or services are to be provided;
A description of the labor or services to be provided and a statement of when those services are to be commenced and completed;
The employer identification number for state tax purposes of the contractor;
The workers’ compensation insurance policy number and the name, address, and telephone number of the insurance carrier of the contractor;
The vehicle identification number of any vehicle that is owned by the contractor and used for transportation in connection with any service provided pursuant to the contract or agreement, the number of the vehicle liability insurance policy that covers the vehicle, and the name, address, and telephone number of the insurance carrier;
The address of any real property to be used to house workers in connection with the contract or agreement;
The total number of workers to be employed under the contract or agreement, the total amount of all wages to be paid, and the date or dates when those wages are to be paid;
The amount of the commission or other payment made to the contractor for services under the contract or agreement;
The total number of persons who will be utilized under the contract or agreement as independent contractors, along with a list of the current local, state, and federal contractor license identification numbers that the independent contractors are required to have under local, state, or federal laws or regulations; and
The signatures of all parties and the date the contract or agreement was signed.

Any material changes to the terms and conditions of the contract or agreement must be in writing, in a single document, and contain all of the provisions listed above that are affected by the change. If any of the above provisions are unknown at the time the contract or agreement is executed, the best estimate available at the time is sufficient to satisfy the requirements. If an estimate is used in place of actual figures, the parties to the contract or agreement have a continuing duty to ascertain the information and to reduce that information to writing once the information becomes known. The breadth and detail of information required by the safe harbor provision, as well as the ongoing requirement to update the information as it changes, make it an onerous one to meet.

Disclaimer: This is simply a general overview and is not a comprehensive article regarding a specific factual scenario. Each factual scenario is different and there is not enough time, nor space to address all different scenarios. You need to speak with a lawyer if you have a legal question.

Employer's Record Retention Periods

2005-06-09T17:10:00.000-07:00

Q: How long should California employers maintain employee records?

California employers are subject to a myriad of federal and state requirements for the retention of employment records. Below is a brief list of important records employers should maintain and the time periods they should be retained in order to avoid civil penalties and to protect against litigation. This is a general list that pertains to most employers in California. Employers should consult with an employment attorney to ensure that they are in compliance with all applicable document retention laws.
Payroll Records
Name, address, Social Security number, occupation, terms and conditions of employment,
the beginning and end of each work period, total daily and period hours, meal periods and split-shift schedules, rates of pay, total wages paid each payroll period, net wages and deductions. These records should be maintained for 4 years pursuant to the FLSA, Cal. Unemployment Insurance Code, and the statute of limitations for various wage and hour claims.

Employee Wage Records
Time cards, wage rate calculation tables for straight time and overtime, shift schedules, individual employee’s hours and days, piece rates, records explaining wage differentials between sexes. These records should be maintained for 4 years pursuant to the FLSA, Cal. Labor Code and the statute of limitations for various wage and hour claims.

Employee Personnel Files
Disciplinary notices, promotions and demotions, performance evaluations, discharge, layoff, transfer and recall files, training and testing files. These records should be maintained for 2 years pursuant to Title VII, ADEA, FEHA, and the ADA.

I-9 Forms (employment eligibility forms)
The later of 3 years from hire date or 1 year after termination pursuant to the Immigration Reform and Control Act.

Hiring Records
Job applications, resumes, advertisements for open positions, internal postings of open positions. These records should be maintained for 2 years pursuant to Title VII, FEHA, ADA, and the ADEA.

Employee Health Records
Records of job injuries, drug and alcohol test records. These records should be maintained for 5 years purusant to OSHA and Cal-OSHA regulations.

Employee Benefits Data
COBRA notices, summary plan descriptions and earnings, beneficiary designations. These records should be maintained for 6 years, but not less than 1 year following a plan termination as determined by ERISA.

Workers’ Compensation Records
Claim file for every work-injury claim containing at least the worker’s name, the claim’s administrator’s claim number, the date of injury, an indication whether the claims is an indemnity or medical-only claim, an entry if there has been a denial, and a Certificate of Consent to Self-Insure (if appropriate). Should be maintained for 5 years from the date of injury; or 1 year from the date compensation was last provided to the employee; or after all compensation due has been paid; or if a claim file has been audited, when the audit becomes final. Cal. Code of Reg.

Disclaimer: This is simply a general overview and is not a comprehensive article regarding a specific factual scenario. Each factual scenario is different and there is not enough time, nor space to address all different scenarios. You need to speak with a lawyer if you have a legal question.

Employer's Right To Search

2005-06-05T18:04:00.000-07:00

Q: Is it ever permissible to search an employee’s desk or backpack?

Employees may occasionally need to search an employee's desk, locker, purse, or other possessions. This can arise where the employee is suspected of possessing drugs or a weapon, or where the employee is accused of theft from the employer or another employee. There are no laws specifically addressing a private employer's right to conduct such searches. (The restriction on searches and seizures contained in the Fourth Amendment to the U.S. Constitution applies only to searches and seizures by the government, not by private companies or individuals.) Therefore, a balancing test applies: does the employer's need for the information outweigh the employee’s expectation of privacy?

It is important, therefore, to reduce employees' expectation of privacy by informing them that their desks, lockers or personal possessions may be searched if deemed necessary by the employer. This should be done through an appropriate policy in the Employee Handbook.

Sample Policy:

Company vehicles, lockers, files, offices, computers and desks are the property of the Company. They are to be used only for work-related purposes unless prior approval is obtained through _______________. The Company reserves the right to inspect all company property at any time to ensure compliance with its rules and regulations.

Disclaimer: This is simply a general overview and is not a comprehensive article regarding a specific factual scenario. Each factual scenario is different and there is not enough time, nor space to address all different scenarios. You need to speak with a lawyer if you have a legal question.

Employer's Obligations to Respond to Subpoenas

2005-06-02T22:20:00.000-07:00

Question: I just received a subpoena for personnel information and other confidential information concerning a lawsuit in which my company is not a party. Can I just ignore it?

Answer: No. You need to take prompt action to protect your interests. If you do nothing, you will waive any valid objections you may have, and may be fined or otherwise punished by the court. In the event you receive such a subpoena, you should check the validity of the subpoena. Has it been properly filled out and served? Service by mail is not valid. Subpoenas must be personally served, i.e., handed to you or something similar to this.

Your company and its employees have privacy rights which protect the disclosure of personnel files and related information. California law requires that a request for a personnel file include a “Notice to Consumer” notifying the employee that such records are being sought, and providing the individual an opportunity to object to the disclosure of the information. If the employee or former employee has not been notified, or objects to the production of the requested records, the employer should not produce the information requested unless and until a court orders otherwise, or the affected employee agrees to the production. If the subpoena requests information that would not involve records concerning a particular employee, or requires that the custodian of records delete all information which would identify any employee, no notice to consumer is required and the employer must either comply or file a motion with the court to “quash” the subpoena.

If the subpoena seeks the disclosure of confidential or proprietary information, you should contact an attorney and move to quash the subpoena or seek an appropriate protective order to preserve the confidentiality of the information sought.

Employers should not produce requested documents before they are due and without being satisfied that the proper subpoena procedures and notice requirements, if applicable, have been met.

Disclaimer: This is simply a general overview and is not a comprehensive article regarding a specific factual scenario. Each factual scenario is different and there is not enough time, nor space to address all different scenarios. You need to speak with a lawyer if you have a legal question.

Meal and Rest Break Regulations

2005-05-12T09:16:00.000-07:00

The DLSE has extended the period that it will receive comments from the public on the proposed rest and meal break period regulations. The public has until May 25, 2005 to submit any comments to the DLSE. It is critical that employers across California voice their support for the new proposed rules.
The proposed regulations can be view at the DLSE's web site here:
http://http://www.dir.ca.gov/dlse/MRPRegs.htm