Harassment Prevention Tips!

May 21, 2018

If you did not watch the last episode of 60 Minutes you missed out! It detailed pervasive and rampant sexual harassment by famed chef and television personality Mario Batali.

And it laid much of the blame at the feet of the CEO of one of the restaurants in which Batali invested, The Spotted Pig, and its owners, Ken Friedman and April Bloomfield. The segment argues that Friedman and Bloomfield turned a blind eye to years of Batali’s sexual harassment of the female employees of their restaurant, and knowingly allowed it to continue.

We have discussed this issue many times in our seminars! You cannot turn a blind eye to this behavior. The EEOC said it best by putting out “…to any effective anti-harassment program…harassment prevention starts at the top.”

According to the EEOC:

“Workplace culture has the greatest impact on allowing harassment to flourish, or conversely, in preventing harassment.… Organizational cultures that tolerate harassment have more of it, and workplaces that are not tolerant of harassment have less of it.… If leadership values a workplace free of harassment, then it will ensure that harassing behavior against employees is prohibited as a matter of policy; that swift, effective, and proportionate responses are taken when harassment occurs; and that everyone in the workplace feels safe in reporting harassing behavior. Conversely, leaders who do not model respectful behavior, who are tolerant of demeaning conduct or remarks by others, or who fail to support anti-harassment policies with necessary resources, may foster a culture conducive to harassment.”

If you want ensure you are doing everything you can as an organization, start by taking a hard look at yourself and your leadership, and answering these key questions:

  • Do you foster an organizational culture in which harassment is not tolerated, and in which respect and civility are promoted?
  • Does your behavior communicate and model a consistent anti-harassment commitment?
  • Have you devoted sufficient resources to effective harassment prevention efforts?
  • Have you nurtured an environment in which employees are comfortable coming forward with complaints of harassment that will be taken seriously, investigated, and corrected, all free from retaliation?
  • Do you impose swift, proportional, and consistent discipline (without playing favorites or showing favoritism) when you have found harassment to have occurred?
  • Do you hold managers and supervisors accountable for preventing and responding to workplace harassment?

Unless you’ve answered “yes” to each of these six questions, then I suggest that you are not doing everything you can to create a top-down, holistic, anti-harassment strategy. Which means that you are not doing everything you can to protect your most valuable asset … your employees.

Come on people, it is time! Let’s take a more aggressive approach to this issue! Managers, supervisors and upper management must all be on the same page. Keep in mind, personal liability is becoming a major factor in in resolving these types of claims. Can you afford to take the chance?

 

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Question: Should employers still test for marijuana?

May 14, 2018

As we all know, a number of the states have legalized the use of medical and recreational marijuana. Generally, the various laws do not require that employers accommodate employees’ lawful use of medical marijuana. It also permits employers still to maintain drug testing policies, drug-free workplace policies, and zero-tolerance drug policies. Yet, with the lawful use of marijuana spreading, employers are asking if it still makes sense to test for it as part of pre-employment drug screenings. We are starting to hear that a large number of applicants are testing positive. Makes sense since the average person does not realize that employers do not have to abide by the legislation in question. Experts are gradually acknowledging that;

“Employers … are quietly taking what once would have been a radical step: They’re dropping marijuana from the drug tests they require of prospective employees. Marijuana testing … excludes too many potential workers at a time when filling jobs is more challenging.”

Other than the fact the fact that employers have historically included marijuana in their drug testing panels, why do employers test for this substance? Well, there are concerns about a person being impaired, especially if they are operating machinery, driving vehicles, or maybe a file clerk that has inadvertently left a bottom file draw open. Workers Comp and other such liabilities are a consideration.

There are those who would argue alcohol is more dangerous and yet the employers do not test for that at the pre-employment stage. How could they? Arguably, the effects are gone relatively quickly as opposed to marijuana.  So, employers, let me ask you—are you pre-employment testing for marijuana, and, if so, are you considering dropping it from your drug testing panel? Email me your confidential thoughts at paaerrep@aol.com. Be assured your names and the name of the business will not be in my next post but your comments may be. My Blog reaches out nationally and internationally so I am sure the comments will vary.

Give me your thoughts.


A New Test for Establishing Independent Contractors!

May 7, 2018

Last week, the California Supreme Court issued a decision in Dynamex Operations West, Inc. v. Superior Court (Lee), and adopted a very broad view of the workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This is a surprising decision that magnifies the risk of classifying workers as independent contractors in California, and is likely to lead to increased claims (in an already litigious area) challenging such classifications in this state.  This is particularly true because the Court’s decision makes it easier for plaintiffs to succeed in getting a class certified in an independent contractor misclassification case.

Background

Dynamex is a delivery company that provides delivery services for retail stores and for consumers.  Dynamex historically classified its delivery drivers as employees but then reclassified them as independent contractors because it was more economical.  [Note to employers: this is generally a bad idea, particularly where improving the bottom line is the stated purpose for the reclassification.]  The drivers basically performed the same work, but were permitted to provide services for other companies and were permitted to hire other workers to assist them. They also had some control over the details of their delivery schedules and routes.

In typical fashion, a driver who worked for Dynamex for a whopping 15 days filed this class action lawsuit (which is now in its 13th year of litigation) alleging various wage and hour violations stemming from the independent contractor classification.  Some of the claims alleged violations of the California wage order applicable to transportation industry employees, such as minimum wage, overtime, and meal and rest break violations.  Other claims alleged violation of obligations set forth in the Labor Code, but not the wage order (specifically, a claim for failure to reimburse business expenses).

In the course of the litigation, a dispute arose concerning the proper test for determining whether the drivers were employees or independent contractors.  The drivers argued that the wage order definition of “employ” (which includes “suffering or permitting to work”) governs.  Dynamex argued that the common law, multi-factor test (known in California as the Borello test), which focuses significantly on the level of control the hiring entity has over the worker’s performance of the work (but also considers many other factors), applies.  Ultimately, the Court of Appeal held that the broad wage order definition applies to the extent the claims in the case alleged violations of the wage order, but that the common law test applies to claims alleging violations of the Labor Code (rather than the wage order itself).  Dynamex petitioned for review by the California Supreme Court, but only as to the ruling that the broad wage order definition applies to claims alleging violations of the wage order.  The California Supreme Court granted review on this issue.

The Supreme Court’s Ruling

In an 82-page decision that reads in significant part like new legislation, the Court held that where a worker alleges violations of a California wage order, the wage order’s definition of “employ” must be used to determine whether the worker is an “employee” entitled to the wage order’s protections or an independent contractor who is not entitled to those protections.  The wage order at issue, like most of the wage orders, defines “employ” in less than clear terms.  The Supreme Court interpreted it as providing three alternative definitions:  (1) to exercise control over the wages, hours, or working conditions, OR (2) to suffer or permit to work, OR (3) to engage, thereby creating a common law employment relationship.  If any one of these tests is met, the worker is an employee covered by the wage order (and able to sue for a violation of any of the wage order’s provisions).

The Supreme Court further announced a new standard for what it means to “suffer or permit” an individual “to work,” so as to make that worker an “employee” within the meaning of the wage orders.  Under this new test, a worker will be PRESUMED to be an employee UNLESS the hiring entity proves ALL of the following:  (A) that the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact; (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

With respect to the first prong (A), the Court explained that this means that the hiring entity must not, in fact, exercise control over the performance of the work, nor retain the right to exercise such control by contract.  With respect to the second prong (B), the Court explained that the worker must not perform work that is a usual part of the hiring entity’s business.  The Court gave the example of a retail store that hires a plumber to fix a leak.  Because plumbing work is not part of the usual business carried out by a retail store, a retail store could establish this prong to support a finding of independent contractor status for a plumber. Conversely, in the Dynamex case before the Court, the drivers were performing deliveries – the same type of work regularly carried on by the company, thereby supporting a finding that Dynamex “suffered or permitted” the drivers to work and that they were “employees” within the meaning of the wage order.  Thus, for a hiring entity to successfully establish prong B of the new test, it would have to establish that the worker performs work that is outside the usual course of its business.  Finally, with respect to prong (C), the Court explained that the hiring entity must show that the worker is actually engaged in an independently established business and cannot do this simply by showing that the worker has the right to do so or is permitted by contract to do so (e.g. a contractor agreement that expressly allows the worker to provide similar services to other entities).  The hiring entity also cannot establish this simply on proof that the worker was not “prevented” from operating an independent business.  Instead, the hiring entity must demonstrate that the worker made the independent decision to go into business for himself and that there is indicia of such an independent business actually operating (e.g. marketing materials, etc.)

Unanswered Questions

To make things more fun for employers, the state’s high court limited its holding (and its new independent contractor v. employee test) to apply only to claims alleging violations of California’s wage orders. The Court held that it was not deciding whether or not the same test would apply to claims alleging violations of the California Labor Code (e.g. an expense reimbursement claim), or whether, a different test (such as the traditional, multi-factor Borello test) would apply.  This issue no doubt will be the subject of further litigation.  The possibility that a better test for independent contractor status may apply to non-wage-order-based claims should be of little solace to employers, however, because most lawsuits in California alleging independent contractor misclassification will predominantly allege violations of the applicable wage order.

Bottom Line

Classifying workers as independent contractors just got a lot riskier in California.  Independent contractor classifications are a lot more likely to be challenged in litigation, and employers will have a much tougher time defeating the claims.  It will also be easier for such claims to be successfully pursued on a class basis.  If you’ve got a significant number of workers performing services for you in California as independent contractors, now is a good time to re-evaluate those classifications.  This also obviously is not a good ruling for those ride-sharing services we all love.

 


A Checklist for Separation Agreements!

April 30, 2018

We consistently receive calls regarding “what should been in the separation agreement so I thought it would be helpful to go over what we typically see in a separation agreement/separation report. Just as an “FYI” employers should not attempt to do this on their own.

First a big caveat: My description of a “typical” agreement does not mean that these provisions are in every agreement or even that these provisions ought to be in some agreements. Each separation or settlement has differing facts that may make certain provisions more important than others. And some employers or employees negotiate differently.

In other words, there is not a one-size-fits-all to this and employers should definitely not attempt to do this without some professional guidance especially if the separation appears to be froth with “issues.”

So what are typical provisions?

  1. Last Day of Employment
  2. Benefits Upon Separation of Employment
  3. A Release of all possible claims related to employment (maybe even broader) with lots of legalese
  4. Confidentiality of Agreement
  5. Non-disparagement of one or more of the parties
  6. No Admission of Liability
  7. No Obligation by Employer to Re-Hire
  8. Return of Property
  9. Affirmation of Any Prior Restrictive Covenants
  10. References or Removal of Negative Information from Personnel File
  11. Many more technical provisions regarding what the governing law is, indemnification in case of breach, incorporation provisions making sure this agreement supersedes prior agreements.

So, before you read headlines or “expert” commentary expressing shock that a separation agreement contains a confidentiality provision, understand that typically these are sought by both an employer and employee.  There may be good reasons that both have for wanting to keep the reasons for the separation and any separation agreement private.

There you are. Again, please consider getting professional assistance with the development of such agreements!


Arbitration Agreements May Be Out Soon!

April 23, 2018

Fueled by the need of legislators to politicize the “me-too” movement, there has been a lot of media attention in recent months on proposed legislation in many states to limit arbitration and/or confidentiality of sexual harassment-related claims.  California, like several other states, has proposed its own legislation along these lines, but now has gone even further, introducing legislation to prohibit employers from requiring employees to arbitration of any claims brought under the Fair Employment and Housing Act (FEHA) or the California Labor Code.  AB 3080 (Gonzalez Fletcher) was a spot bill/placeholder bill that, in original form, was drafted to make non-substantive changes to laws related to use of E-verify.  In late March, however, the bill was gutted and amended and is now an anti-arbitration bill.  This bill would add sections 432.4 and 432.6 to the Labor Code and would prohibit California employers from (1) requiring an applicant or employee to agree to arbitration of FEHA or Labor Code claims as a condition of employment, continued employment, or receipt of any employment-related benefit; (2) contractually prohibiting an employee or independent contractor from disclosing sexual harassment suffered, witnessed, or discovered by the employee/independent contractor.  These practices would also be made “unlawful employment practices” under FEHA, entitling employees to remedies under both FEHA and the Labor Code for violations.  In current form, the bill would not appear to prevent “voluntary” arbitration agreements (which may include agreements with limited opt-out rights), but it would still have a significant impact on the ability of employers to resolve employment-related disputes in arbitration instead of court.  If ultimately passed by the legislature and signed into law, the new law would apply to contracts for employment entered into, extended, or modified after January 1, 2019.

It is important to note that similar legislative efforts to limit employment arbitration agreements have been introduced in California in recent years, but have not succeeded.  It is unclear whether this bill will meet a similar fate.  Even if passed, it seems to me that this law still would be subject to legal challenge based on preemption by the Federal Arbitration Act (which preempts state laws that discriminate against arbitration).  Of course, the likely success of such a challenge, which would take years to resolve, would not be of much aid or protection to employers in the meantime.

This bill is opposed by many industry groups, including the California Chamber of Commerce.  We will keep you posted about further developments with this bill.


Travel Time Pay: A Clarification

April 16, 2018

Under California law, an employee must be compensated for all time during which he/she is subject to the “control” of the employer, regardless of whether or not the employee is actually being “suffered or permitted to work.”  Based on this standard, California law (in contrast to the FLSA) does not recognize a distinction for compensability purposes between out-of-town travel that takes place during “normal working hours” and travel that takes place outside of normal working hours. If an employee has to undertake out-of-town travel, all travel time spent on public transportation or in a car is compensable as hours worked (except that where the employee travels to the airport/train station and the airport/train station is the same or substantially similar distance as the employee’s normal commute to the workplace, the time getting to the airport/train station is not compensable).  The employee must be paid for all time from when he/she arrives at the airport until he/she reaches the hotel destination.  After that, the employee need not be paid for time spent staying at a hotel (except to the extent actual work is being performed, of course).  Additionally, if an employee takes a break from “traveling” to engage in personal pursuits (e.g. sightseeing after arriving in city but before going to hotel), that personal time need not be compensated.

California law is similar to that of the FLSA (and DOL guidance) on the issue of compensability of travel time during a normal work day.  In other words, normal commute time from an employee’s home to/from the worksite is not compensable.  This is subject to the caveat that if an employee is required to drive a company vehicle under strict conditions that prevent the employee from engaging in any personal pursuits during their commute (e.g. restrictions that disallow passengers and similar restrictions), the time the employee is required to drive the vehicle will be deemed time that is subject to the control of the employer and, therefore, compensable.  Finally, as is the case under the FLSA, all time spent traveling during the course of the workday (after reporting to the first worksite) is compensable, and if an employee is required to report to a different worksite than usual, the commute time to that workplace is compensable to the extent it exceeds the employee’s normal commute.

Employers are reminded, however, that even in California, they may establish a different rate of pay for travel time than usual work time, as long as the travel rate is at least minimum wage and communicated to the employee before the travel begins


Are Service Advisors Now Exempt? Hold on, Maybe Not!

April 9, 2018

On April 2, 2018 the U.S. Supreme Court ruled that service advisors at car dealerships are exempt under the federal Fair Labor Standards Act (FLSA).  Dealers in California, however, should seek advice of legal counsel before concluding that the decision is the final word.

Under §213(b)(10)(A) of the FLSA, overtime pay requirements do not apply to any salesman engaged in selling or servicing automobiles if his employer is engaged in the business of selling vehicles to ultimate purchasers.  Between 1978 and 2011, consistent with several federal court decisions, the Department of Labor (DOL) interpreted this language to mean that service advisors were exempt from overtime pay.  But in 2011, the DOL reversed course, finding the term “salesman” to exclude service advisors.

Relying on the DOL’s 2011 finding, in 2012 service advisors sued the dealer seeking overtime pay.  Encino Motorcars, LLC defended, rejecting the DOL’s last interpretation and contending that, under the FLSA, service advisors interact with customers and sell them services for their vehicles.  The dealer noted that service advisors meet customers, hear their concerns, suggest repairs and maintenance services, sell new accessories or replacement parts; record service orders, follow up as services are performed, and explain repairs and maintenance work when customers pick up their cars.

The Ninth Circuit (which covers California), citing the principle that exemptions to the FLSA be construed narrowly and the absence of any reference to service advisors in the legislative history, concluded that Congress did not intend to exempt service advisors.  It identified service advisors as “salesmen” and associated them only selling, rather than servicing.

The U.S. Supreme Court reversed, rejecting the narrow approach to interpreting the FLSA in favor of one that is “fair”.  Relying on Encino Motorcars’ list of tasks performed, the Court determined that a service advisor is obviously a salesman, that is, a man who sells goods and services.  The Court found that the exemption covers a service advisor primarily engaged in either selling or servicing, and, going back to the language of the FLSA, concluded that an advisor is a “salesman. . .primarily engaged in …servicing automobiles.”

While dealers across the country may breathe a sigh of relief, dealers in California should be cautious in considering whether to reclassify or treat service advisors as exempt.  First, California courts do not follow the “primarily engaged” test found in the FLSA.  Rejecting that standard in favor of a quantitive test, the California Supreme Court in Ramirez v. Yosemite Water Co., 20 Cal.4th 785 (1999), ruled that a California employer claiming that an employee is exempt must demonstrate that the individual spends more than 50% of his time performing exempt tasks.  Whether the tasks identified by Encino Motorcars in defending its position occupy more than 50% of service advisors’ time at a dealership, as opposed to time spent directing service technicians or their supervisors, completing warranty paperwork for the manufacturer, and other tasks unrelated to credited by the Court, is fact specific to each dealership and invites a time study analysis.

Second, California courts have held that California wage laws often diverge from the minimal standards established by federal law, and when state law is more favorable to employees, state law prevails.  Mendoza v. Nordstrom, Inc, 2 Cal.5th 1074 (2017); Tidewater Marine Western, Inc. v. Bradshaw, 14 Cal.4th 557 (1996).  Payment of overtime to service advisors may be more favorable to them in some cases, and California courts would be more inclined than not to determine that a service advisor is non-exempt under state law.

Finally, employees in California aggressively pursue perceived rights in court, unfazed by existing precedent and inventive of novel theories of liability and damages.  Controlling the overtime hours worked by service advisors, who often stay late to meet customers, may be difficult.  Consequently, a dealer must carefully weigh the risks of liability and damages as well as the costs of defense in deciding whether to classify service advisors as exempt.

The Above was written by Art Silbergeld.

Art Silbergeld, a partner at Thompson Coburn in Los Angeles, defends employers, including many car dealerships, in federal and state court wage and employment litigation.  Recognized by his peers as one of the top management defense attorneys in California, Art has worked closely with Jim Potts over three decades.  He may be reached at (310) 282-9412 and asilbergeld@thompsoncoburn.com.