Two New Laws. One Imposes Criminal Penalties!

December 30, 2013

New Law Imposes Criminal Penalties on Employers!

On October 10, 2013, Governor Brown signed SB 390 into law to amend Labor Code Section 227. As a result, effective January 1, 2014, Californian Law prohibits employers from failing to make agreed-upon payments to health and welfare funds, pension funds, or various benefit plans. This new legislation will make it a crime for an employer to fail to remit withholdings from an employee’s wages that were made pursuant to state, local, or federal law.

More specifically, the new law allows the Labor Commissioner to pursue a criminal misdemeanor charge against employers who do not remit payroll taxes. Furthermore, it provides that it is illegal for an employer to wilfully or with the intent to defraud, or fail to remit withholdings from an employee’s wages pursuant to local, state, federal law to the proper agency. If the employer fails to remit $500.00 or more in wage withholdings, the violation is a misdemeanor that is punishable by imprisonment and a fine of not more than $1,000.00.

New Law adds Military and Veteran Status to list of protected Characteristics.

The California Fair Employment and Housing Act (FEHA) prohibits employment discrimination by employers with 5 or more employees. It protects the right and opportunity of all persons who seek or obtain employment from discrimination based upon race, religion, color, national origin, disability, sex, gender, gender identity, gender expression, age or sexual orientation, marital status, and genetic information/characteristics.

Governor Brown was very busy in October and signed AB 556 into law effective January 1, 2014. The new law added a new protected category based on “Military and Veteran Status.” The bill provides that employers cannot discriminate against military personnel or veterans which also includes reservists. This is where employers can get into trouble.

Employers will have to be extremely careful with employees requesting time away for weekend reserve request, the two week commitment every year, temporary calls for active duty, and having a position for them when they return. There are also federal laws to protect returning veterans. Be patient and do not assume or second guess requests. You are permitted to ask for documentation to support any time off.

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New IRS Law Effective January 1, 2014

December 23, 2013

IRS Announced a New Mileage Reimbursement Rate Effective January 1, 2014

The IRS announced the 2014 optional standard mileage reimbursement rates. Beginning January 1, 2014, they decrease one-half cent from the current rates in effect, and are as follows:
• 56 cents per mile for business miles driven;
• 23.5 cents per mile driven for medical or moving purposes; and
• 14 cents per mile driven in service of charitable organizations (same as current rate in effect).

Employers using the standard IRS rates for mileage reimbursement purposes should adjust their expense reimbursement policies accordingly.

A Holiday Message!

In the spirit of the holiday party season, I offer the following as a “public service announcement” for employers and HR departments everywhere:

1. Host responsibly. An office holiday party is not the same as a college frat party.

2. Consider holding your party mid-week (or even mid-day), instead of a Friday or Saturday night.

3. Limiting the availability of alcohol will curb overconsumption. Making sure enough food is available will also keep people’s drinking in check.

4. Limiting consumption will help to limit employees’ misbehavior, legal risks, and potential liabilities (think drunk drivers, sexual and other harassment, fights, and other incivility better left to a Sunday tailgate)

5. When employees overindulge, don’t be afraid to cut them off. Make sure trained bartenders and designated sober management-team members are monitoring consumption.

6. Just in case, have cab vouchers, designated drivers, and hotel rooms available for those who cannot safely navigate their own way home.

Have a happy and safe holiday season.


$700,000 Attorney Fees on a $27,000 Verdict!!

December 16, 2013

This is why we preach you have to get out of a lawsuit as quickly as you can! Mediation may require employers to pay even if the employer did nothing “wrong.” I can perfectly understanding “drawing the line in the sand” but consider this. Last week, the Ninth Circuit issued its decision in Muniz v. UPS, holding that the trial court did not abuse its discretion in awarding the plaintiff close to $700,000 in attorneys’ fees, even though the plaintiff’s damages recovery was only $27,000 and the defendant defeated the majority of plaintiff’s claims prior to trial! This result is an unpleasant example of how an employer can be largely victorious in defending an employment suit yet still lose big on attorneys’ fees.

In Muniz, the plaintiff was given a performance improvement plan and later demoted, based on unsatisfactory performance. Plaintiff sued, alleging “kitchen sink” discrimination based on age and gender, and also alleged retaliation and negligent supervision and training. Plaintiff’s age discrimination, retaliation, and negligent supervision claims (as well as plaintiff’s claim for punitive damages) were defeated and/or voluntarily dismissed prior to trial (meaning UPS prevailed on these claims). The only claim that was actually tried was plaintiff’s claim for gender discrimination based on being given a performance improvement plan and later demoted. The jury determined that plaintiff’s demotion was motivated by gender discrimination but awarded plaintiff damages of only $27,000 (much less than plaintiff’s plea to the jury to award her $700,000). The jury also concluded that plaintiff’s performance improvement plan was motivated in part by gender discrimination, but that UPS would have taken the same action for legitimate, non-discriminatory reasons. As such, the plaintiff was not permitted to recover damages (alleged emotional distress) associated with the performance criticism.

In sum, the defense largely prevailed in the case, having defeated all but one of plaintiff’s claims and substantially limiting plaintiff’s recovery. That is, until plaintiff filed a motion for recovery of attorneys’ fees for prevailing on one FEHA discrimination claim. Plaintiff outrageously sought $1.9 million in fees for her limited success, including a claimed lodestar (number of hours expended times hourly rates) of $1.3 million (which included time spent litigating the claims that were defeated) and a requested 1.5 upward enhancement. The trial court denied the requested 1.5 multiplier and limited its analysis to the reasonableness of 1.3. In this regard, the trial court found that plaintiff’s counsel’s proffered hourly rates were unreasonable and reduced them slightly. The trial court also found that plaintiff’s counsel had not sufficiently proven the number of hours expended on the litigation and, therefore, reduced the compensable total hours by 20 percent, bringing the fee award down to $773,000. At that point, the court considered UPS’ argument that the fee award needed to be substantially reduced to account for plaintiff’s very limited success and the extreme disproportion between the plaintiff’s damages and the amount of fees sought. The trial court reduced the fees by only 10 percent and awarded plaintiff nearly $700,000 in fees.

UPS appealed to the Ninth Circuit, arguing primarily that the fee award should have reduced more than 10 percent to account for plaintiff’s limited success. The Ninth Circuit disagreed, relying heavily on the deferential standard of review which gives a trial court broad discretion to set the amount of fees awarded. The Ninth Circuit held that the trial court could have reduced the fee award more, but that it could not be said that it was an abuse of discretion for the trial court not to do so. The court reasoned that a reduction for time spent on unsuccessful claims is proper only to the extent it can be demonstrated that certain hours were spent exclusively on the unsuccessful claims. Time spent, for example in discovery, on both successful and unsuccessful claims should not be reduced from a fee award. The Ninth Circuit concluded that the trial court properly considered these issues and did not abuse its discretion in determining the amount of fees to award.

The Muniz case is another one for the plaintiffs’ attorney arsenal. It will make it more difficult for employers fighting FEHA claims in California federal courts to successfully limit any award of attorneys’ fees to a prevailing plaintiff, thereby effectively increasing the incentive to settle such claims early on. I get it. It seems like “extortion” but do the math. It really boils down to dollars and “sense.”


Playing the “Race Card”-A Challenge for Employers!

December 9, 2013

Playing the “Race Card,” according to Wikipedia, is defined as an “idiomatic phrase that refers to the act of bringing the issue of race or racism into debate, perhaps to confuse the matter. Playing the race card is amplified in socio-political systems where individuals know they may be formally awarded special access to rights and resources based upon their membership of a racial group. Race Card is a metaphorical reference to card games in which a trump card may be used to gain an advantage.” This is one of the most problematic areas employers, managers, and human resource professionals are confronted with in how to manage minorities, without every action being challenged as discriminatory.

Managers, especially, have to learn how to get around the mental obstacles associated with minorities without compromising the personnel policies, practices, and procedures of the employer; otherwise, the company will not be run like a “well oiled” machine. Admittedly, this task is not an easy one but managers and supervisors must, at the outset, realize that each of their employees’ efforts may bring value to the whole despite their ethnic background. With this, management needs to focus on diversity by planning and putting certain systems into place, all in an effort to have the entire staff understand the potential advantages of having a diverse workforce.

Sadly, it is true minorities will “play the race card,” however, Managers cannot live in fear that one of their employees will utter the unspeakable “You are singling me out because I am …!” Since Managers and supervisors play a key role in ensuring that the work environment is at least a suitable place to work for everyone, not just the privileged few. Therefore, in the performance of their responsibilities, managers and supervisors need to continually educate themselves because of the changing demographics within their respective work environments, which may include learning additional values inconsistent with their own. They need to look within themselves. This may create ongoing self-awareness that forces them to understand that they may have their own bias that manifests itself from their attitude, tone, or even body language. Minorities can spot such biases a mile away. The sooner a manager or supervisor recognizes they may have their own biases, the sooner that they will realize that just because people are different, it does not mean they are inferior. If Managers and supervisors do not come to grips with these harsh realities, and choose to ignore the fact that they may have some internal personal issues related to having a diverse workforce, it will cost the company time, money, and loss of productivity.

Furthermore, it is critical that Managers and supervisors need to re-enforce to their staff that having a diverse workforce is an advantage because each group may have different positive perspectives that can benefit the whole by working more effectively together. This may well keep the employees working more cohesively together despite the differences that may have with other ethnic groups as well. By instilling this message, employees will begin to understand that maximizing the contributions of all, regardless of background, will contribute to the overall organizational goals. The reality is, a large number of employees appear to lack “social intolerance.” Having a positive environment may, at a minimum, cut down on the accusations levied by minorities because such allegations would be inconsistent with the culture of the environment and your own ideologies.

Minorities will play the race card if they think they can gain by the accusations. Whether they will be successful if they bring an action against the employer is entirely up to their managers and supervisors for all of the reasons previously mentioned. Remember, at the end of the day, when managing “people of color”, all races under the skin are just like everybody else. It’s the variation among individuals that poses the greatest risk to a harmonious work environment. Manage accordingly.

Note: The above message was taken in part from my newly released book; “Walking on Eggshells, (Managing Minorities in the Workplace), Dorrance Publishing, November, 2013


Court Determines Employee With “Crying Spells” Protected Under the FMLA!

December 2, 2013

Here are the facts. An employee was forced to endure the unthinkable: her daughter had just become the victim of a sexual assault.
In the weeks that followed, the employees alerted her employer of the assault and the care her daughter would require in the time ahead. The employee suffered too. As her doctor would later report, she had crying spells, a lack of energy and an inability to focus or concentrate.

To complicate matters further, the also had fairly significant performance problems in her job. From an HR standpoint, the timing couldn’t have been worse. The employee had been counseled for months that she could not work unauthorized overtime, and in the months leading up to the assault, she had been repeatedly counseled for her poor time management, and lack of initiative, detail and follow through. Shortly after the assault, two things occurred that are relevant here:

1. The employee began bringing her daughter to work with her every day; and
2. The employer had reason to believe she had turned in inaccurate timesheets and concealed unauthorized OT. As a result, the employee was suspended.
Shall I complicate matters even further?

Two additional facts about the employee’s situation:

1. When the employee brought her daughter to work, her employer rightfully was concerned. But her boss allegedly told the employee that she had to choose between caring for her daughter or keeping her job and;
2. In conjunction with her formal disciplinary hearing, her employer refused to consider her written “rebuttal” to the disciplinary charges calling for her termination.
The employee was terminated. An FMLA lawsuit ensued, and the court found that there was enough evidence based on the above for a jury to find that the employer interfered with her FMLA rights and retaliated against her exercising those rights.

Insights for Employers

Take a deep breath. There are plenty of takeaways here for employers:

1. Courts continue to loosen the standards of a serious health condition. I don’t mean to downplay how difficult the ordeal must have been for the employee, but what was her serious health condition requiring FMLA leave? According to her doctor, it consisted of crying spells and her inability to focus or concentrate. These symptoms alone were enough for the court here to presume that the employee suffered from a serious health condition entitling her to FMLA leave. This finding sends a message to employers that courts are focusing far less on the actual definition of a serious health condition and more on the FMLA interference and retaliation claims themselves. Be warned.

2. Note to managers, supervisors, owners, HR professionals and anyone else in a position to effect a personnel decision: Stop making stupid comments! Did this employee’s boss have the right to be concerned when she showed up to work every day with her daughter in tow? Absolutely. But his reaction created liability for the employer. I’ve detailed all too often stories about employers who now face a jury on their FMLA/or FEHA claims because they allegedly made foolish remarks in conjunction with a termination decision. Don’t do it, and train your managers and supervisors to do the same. This case serves as yet another example of how quickly a court will send a case to a jury as a result of one indiscreet comment.

3. Due process must exist for all employees. Do you know what juries detest? Employers who don’t allow their employees a chance to be heard. Here, the employer claimed that it had an “honest belief” that the employee had engaged in timecard fraud. That argument may have held up had the employer actually given the employee a chance to fully defend herself. But because it refused to entertain the employees’ “rebuttal” submission, the court determined that her employer could not rely on the “honest belief” defense. Ouch. Let’s be clear — where termination is at issue, employers have every reason to bend over backwards in allowing the employee to explain her side of the story. Constitutional due process may not apply for all, but employers still should strive for it. When the employer refused to hear the employee out, it paid the price.

4. Be empathetic. I am not suggesting that we allow an employee like this employee to use a tragic personal situation as a shield against any and all discipline (including termination), but in a situation like this one, it’s all the more critical to practice patience, compassion and concern. I didn’t sense any of the above when reading this court case, and I wonder if the court felt the same in refusing to dismiss these FMLA claims against the employer. An intangible, for sure, but judges are human, too, and these intangibles can impact whether a case is dismissed or not.

5. Retaliation is a scary predicament for employers. In this case, the employee also complained that the employer “overloaded” her with work upon her return from FMLA leave. However, the court’s decision contains scant details of what the overload actually consisted of. Yet, the court noted the overload as a factor in refusing to dismiss the case. That’s bothersome to me. If work given to an employee is contained within her job description, courts should not act as a super-personnel department in second guessing the situation. Nevertheless, the court did so here. The result is that employers must be mindful not to “load up” on any employee returning from FMLA leave.

A final note. My blogs have become somewhat longer but I believe giving the type of detail noted above, my points of emphasis are easier to remember.