New Case: Corporate Officers & Managers Can Be Liable For Wage & Hour Violations

August 31, 2009

In June 2008, I wrote an article that corporate officers and managers could not be held liable for wage and hour violations (specifically unpaid wage claims). Only the company could be held liable if it was a corporation. The basis for that article was a California case that dated back to 2005. Well, that has now changed (somewhat). The Ninth Circuit Court of Appeals, (which covers California) has just ruled that corporate officers and managers don’t enjoy the same protection under the Fair Labor Standards Act (FLSA).

The ruling is based upon a set of events that started back in 2003. At that time the Castaways casino in Las Vegas, Nevada filed for bankruptcy, and then ceased operations in 2004. A handful of employees sued, claiming they hadn’t been paid their final wages or accrued vacation earnings. Since the corporation was in bankruptcy, the employees named three top level managers (the CEO, CFO, and the Labor Relations Manager, as defendants in the lawsuit. Both the trial court and the Nevada Supreme Court ruled that, under Nevada State law, individual managers and officers could not be held personally liable for unpaid wages and dismissed the case.

One employee then pursued his unpaid wage claims under the federal FLSA. Reversing the federal district court, the Ninth Circuit ruled in Boucher v. Shaw that under the FLSA’s definition of “employer,” if individual managers and officers control and direct the work of employees, and takes action that deprive those employees of earned wages, the individuals can be made to pay the employees out of their own pockets.

Now remember, this is on the federal level. California law still stands, however, if the employee seeks to hold managers and corporate officers liable, they would have to bring their claim in federal court.  The other down side is that the costs to litigate at that level is going to be extremely high. All attorneys do not litigate in the federal courts. Their rules are so complicated that most attorneys shy away from it. Therefore both the plaintiff, and the defedant, must utilize the services of a specialist. If the defendant loses then they are also liable to pay the attorney fees of the plaintiff.

You don’t want to be in this position. Do what you can to get those wages paid if the company is going under. Skip the other bills if need be (except ours!!! LOL).

A New Issue Regarding Auto Technicians

August 24, 2009

I recently received a call from an attorney buddy of mine who is currently litigating a wage & hour case that involves techs. The attorney for the former employee is trying to argue that the “stand around” time (when the tech is waiting for work but on the clock) should be compensated separately at the rate of $16.00 per hour (if he provides his own tools and minimum wage if he does not)!!!

Currently, the techs are being compensated either by the total hours on the clock (including OT)  or by the flag hours, whichever is greater. The attorney is trying to argue that they should get the stand around time in addition to the flag hours. This guy is either desperate or he is simply trying to create a name for himself with a precedent decision that changes the law.

I will keep you posted on this one!!

Retention Period For I-9s

August 24, 2009

I just want to clarify what appears to be a misunderstanding of the I-9 retention requirements. As I reported several weeks ago, as well as recently at several speaking engagements, ICE is gearing up to start aggressively auditing I-9s for targeted employers. It’s not just ICE. Last week the U.S. Department of Labor conducted a wage and hour audit of one of our clients. After they finished, the agent requested to see the I-9s.

The retention requirements are simple. Create a folder with all of your current employees going back three years. If you have employees who have worked longer than three years their I-9s do not have to be in the folder but do not discard them. Keep them separately in another folder and do not put them in the personnel files. These means you have to purge the 3 year folder every year. Can you legally leave all of the current employee I-9s in the same folder? Yes, but why give them more than what’s required.

The other question that has recently come up is the retention requirements for former employees. The retention period is technically one year, however, the I-9 must be kept either for three years after the date the employee was hired or one year after the date employee terminates employment, whichever is later.

What’s the safe course? Keep the folder with all of the current employees in one section, and the terminated employees in another section, all going back three years.  Never discard any of these records after the three years. Purge them and keep them in storage.

E-Verify Closing In: Do You or Don’t You?

August 24, 2009

First, you should be aware that there is a current law suit seeking to invalidate the regulation. If the law suit is unsuccessful, clients who have federal contracts have to register new qualifying contracts after the effective date of September 8, 2009, or for certain substantial indefinite delivery/indefinite quantity contracts extending at least six months beyond the effective date (so if you already have a contract that extends beyond the effective date you would have to comply). You would then have an additional 30 days to enroll in E-Verify, and must commence verification of newly hired employees and current employees assigned to work on that contract 90 days later. If an employer chooses to E-Verify their entire workforce, rather than only employees assigned to the contract, the employer would have an additional 90 days.

Second, employers in general may also be required to use the E-Verify but Congress has not made that determination. Word has it that if they do decide to make it mandatory for all employers, it appears that it will be a process that will be phased in over a four year period (beginning with federal contractors and employers with more than 250 employees). We will have to wait and see.

Dealing With Personality Conflicts, Bullies, And Harassers

August 17, 2009

Every work environment at some point may have to address personality conflicts, bullies, and harassers. Sometimes there isn’t a difference between the three. Personality conflicts are a “way of life” for some people. There are those who simply cannot get along with others. In the workplace, an employer can be confronted with scenarios where employees are sometimes competing for the same position or promotion and their once great relationship changes. Accusations of harassment begin flying “to anf fro” and the employer gets caught up in the middle (if they are each from a different ethic background the situation can become even more cumbersome).

From a legal perspective, employers have a responsibility to protect their employees from each other. They need to manage the risks, and be attentive to issues that might spark violence in the workplace. One of the very first workers compensation cases (back in the 1940s-yes, before my time!) was a case where two employees had a personality conflict at work and decided they would handle the matter after work and off company premises. One of the disgruntled individuals showed up with a hammer and beat the “heck” out of the other. The loser filed a workers comp case and the employer argued that it was not work-related. The court disagreed citing the relationship (and incident) stemmed from the work environment. A few years ago the California legislators tried to pass a specific law regarding supervisors who bully employees. It didn’t go through but the direction is clear-employers will have to protect its employees from any kind of violence in the workplace.

To be on the safe side of litigation, an employer needs to communicate both an “Anti-bulling and Anti-violence” policy to thier employees (and especially managers and supervisors). Employees are now suing over this issue and bring their cause of action based on “Negligence.” The underlying element is that the employer breach their duty owed to their employees to protect them from such behavior. Never assume that two employees will “work it out.” If you need us to come in and assist you, give us a call. We have helped to resolve these matters many times.  Sometimes individuals are terminated, while other times the two parties realize that being terminated is not worth it.   

One final note: Inform your managers and supervisors that yelling and screaming are NOT motivators and that such behavior will not be tolerated.

California Supreme Court Clarifies Standards for Workplace Video Surveillance

August 10, 2009

Can you believe the court found on behalf of two employees who brought an action for invasion of privacy and the cameras was never turned on while they were at work!

 The facts of the case were very interesting. The employer operated a nonprofit residential facility for abused and neglected children, including two who had been victims sexual abuse. The employer found out that the computers were being used at night to access child pornography websites and were concerned that it might be an employee who worked with the children.  The director of the facility decided to install a secret video camera to try to identify the culprit. It’s important to note that the Director did not suspect either one if the plaintiff but did not tell them to protect the integrity of the investigation.

 The camera was placed in a bookcase in the office shared by the plaintiffs and although it was plugged in, it was never turned on during the day when the plaintiffs were present. One day the plaintiffs saw the red motion detector light come on and did a hard target search to find out what the light was for. They discovered the camera and discussed the matter with the Director. The Director explained to them why the camera had been installed and even showed them the film footage which confirmed that they had never been recorded. The plaintiffs were not convinced and sued for invasion of privacy based upon the argument that they had a reasonable expectation of privacy within the confines of their office, intentional infliction of emotional distress and negligent infliction of emotional distress. The lower court dismissed the case, and the appeals court disagreed, and decided that the case should be heard on the merits. The defendant appealed that decision to the California Supreme Court who agreed to hear the case. 

 After hearing the entire case the high court decided that the employer had intruded into an area where the plaintiffs had a reasonable expectation of privacy but that the facts of the case prevented this intrusion from rising to the level of an actionable privilege violation.

 In reaching this conclusion, the Court explained that employees may have a reasonable expectation of privacy in a non-public area like an office, even if others have access to it. The Court noted that the plaintiffs had not been informed of the placement of the video camera which could have reduced the expectation of privacy. They also explained that the employer did everything to minimize the invasion such as the narrow confinement of the video camera, the short window of time that the camera would be activated, and the defendants’ compelling reason for installing the equipment.

Here’s how an employer can minimize their exposure:

1. Notify employees and others in the workplace about areas under surveillance;

2. Avoid the placement of video surveillance cameras in locations where such

    equipment is a clear violation of the law (e.g. restrooms, locker rooms, etc.);

3. Watch installing cameras in non-public areas such as private offices;

4. Audio surveillance is subject to a different, and often, greater standards;

 As always if you have any questions please give us a call!

Criminal Charges Can Be Filed Re: I-9’s

August 5, 2009


 Ok! You know how I have been pushing HR Audits? Here is only one reason why (we review I-9’s as a part of that audit).

WASHINGTON – U.S. Immigration and Customs Enforcement (ICE) is launching a bold, new audit initiative today by issuing Notices of Inspection (NOIs) to 652 businesses nationwide – which is more than ICE issued throughout all of last fiscal year. The notices alert business owners that ICE will be inspecting their hiring records to determine whether or not they are complying with employment eligibility verification laws and regulations. Inspections are one of the most powerful tools the federal government has to enforce employment and immigration laws. This new initiative illustrates ICE’s increased focus on holding employers accountable for their hiring practices and efforts to ensure a legal workforce.

“ICE is committed to establishing a meaningful I-9 inspection program to promote compliance with the law. This nationwide effort is a first step in ICE’s long-term strategy to address and deter illegal employment,” said Department of Homeland Security Assistant Secretary for ICE John Morton.

Employers are required to complete and retain a Form I-9 for each individual they hire for employment in the United States. This form requires employers to review and record the individual’s identity document(s) and determine whether the document(s) reasonably appear to be genuine and related to the individual.

The 652 businesses being presented with a NOI today for a Form I-9 audit have been selected for inspection as a result of leads and information obtained through other investigative means. Due to the ongoing, law enforcement sensitive nature of these audits, the names and locations of the businesses will not be released at this time.

In FY 2008, ICE issued 503 similar notices throughout the year. In April, ICE implemented a new, comprehensive strategy to reduce the demand for illegal employment and protect employment opportunities for the nation’s lawful workforce. Under this strategy, ICE is focusing its resources on the auditing and investigation of employers suspected of cultivating illegal workplaces by knowingly employing illegal workers. The nationwide initiative being launched today is a direct result of this new strategy.


— ICE —

U.S. Immigration and Customs Enforcement (ICE) was established in March 2003 as the largest investigative arm of the Department of Homeland Security. ICE is comprised of five integrated divisions that form a 21st century law enforcement agency with broad responsibilities for a number of key homeland security priorities.

“CONFIDENTIALITY NOTICE PRIVILEGED / CONFIDENTIAL INFORMATION may be contained in this message or any attachments. This information is strictly confidential and may be subject to attorney-client privilege. This message is intended only for the use of the named addressee. If you are not the intended recipient of this message, unauthorized forwarding, printing copying, distribution, or using such information is strictly prohibited and may be unlawful. If you have received this in error, you should kindly notify the sender by reply e-mail and immediately destroy this message. Unauthorized interception of this e-mail is a violation of federal criminal law.”

Some Employers Are Eliminating Vacation Benefits

August 3, 2009

Hey, anything to save a buck these days! We have received a number of calls from clients asking whether or not it is legal to eliminate vacation benefits. Vacation policies are a non-mandated benefit which basically means you can eliminate them or reduce the number of days that are offered. Just remember that all days previously accrued cannot be forfeited.

We have come across a major issue. Several of our clients have informed their employees that they will continue to “accrue” vacation but will not be paid for the vacation time when they take it. Simply stated, the intent was to permit employees the opportunity to take time off without pay. This is a problem. Under the guidlelines of California law, if an employer has a vacation accrual policy (the days accrued are based upon the number of days or months worked) a financial benefit right is vested and they have to be paid for their vacation days if they take the time of or if they leave the company.

The way around this is simple. The employees must be informed in writing that the company has eliminated vacation benefits (give an effective date). You should also inform them that any days previously accrued will be honored (some clients have elected to pay out all of the accrued vacation thereby making for a smoother transition).

Please let me review all memos prior to passing them out to staff members.

Additional Note:

I have created a new website that fully explains the arbitration and mediation services offered under my LLC. As you may recall, I wrote an article a few weeks ago discussing my concept of an alternative dispute resolution plan (I received a great response and a number of clients are signing on). My new website ( fully explains the arbitration and mediation process. Check it out!