Arbitration Agreements and Minimum Wage Increase May Both be Gone

August 30, 2015

Employment Arbitration Agreements May Be Gone!

Nationally, the courts in the past have upheld or changed arbitration agreements so many times who can keep up with it! Now, another dagger has been thrust through the hearts of employers who continually tried to avoid the high cost of litigation.

Recently, California’s Legislature has passed a bill (AB 465) to ban employers from requiring applicants and employees to agree to arbitrate employment disputes as a condition of employment or continued employment. That bill is now headed to the Governor’s desk to sign or veto.  If signed into law, it will become effective January 1, 2016 and will apply to all agreements entered into, modified, altered, renewed, or extended on or after that date.  Under the new law, applicants and employees would still be permitted to “knowingly and voluntarily” agree to arbitrate employment disputes, but an employer would not be able to mandate agreement to arbitration as a condition of employment.  Additionally, even in the case of a knowing and voluntary agreement to arbitrate, the burden would be on the employer to prove that the applicant or employee’s agreement was actually knowing and voluntary (and of course employees will argue they were coerced).

As California employers know, there are many benefits to arbitration (in lieu of court) as a forum for resolving employment disputes and, if signed into law, this bill will make it much more difficult for employers to enter into arbitration agreements with employees as well as to successfully enforce such agreements.  Employers will also lose an effective tool for preventing abusive class action lawsuits against them in California.

Finally, as we know, California has a tendency to be a “trend setter.” If this goes into law it is without question that we will see this as an issue nationally.

Minimum Wage Increase Has Died – For Now

State Senator Mark Leno’s attempt to further increase the California minimum wage starting on January 1, will not be successful.  Currently, California’s minimum wage is $9.00 an hour.  It is currently slated for an 11.1 percent increase at the end of this year, when it will move to $10.00 an hour.  Earlier in this legislative session, San Francisco based Senator Mark Leno introduced Senate Bill 3, which if successful would have raised the minimum wage to at least $11.00 an hour at the end of this year (effective January 1, 2016) and at least $13 an hour on July 1, 2017.  These would be major increases and would have applied broadly to all California employers.  In addition, the bill would have required automatic raises to the minimum wage tied to the cost of living after 2017.

In June, the California State Senate passed the bill by a 23 to 15 vote.  The bill was moving forward in the Assembly until yesterday, when it stalled at the Assembly Appropriations Committee, after discussions.  As a result of yesterday’s development, it is highly unlikely that there will be any legislative changes to the state minimum wage in this session.  Therefore, the only statewide increase will be the change on January 1, when the minimum hourly wage goes to $10 an hour.  However, many municipalities in California have already passed their own minimum wage legislation (San Francisco, Oakland, Los Angeles, Emeryville), with much higher requirements.  In addition, other cities are currently debating whether or not to enact their own minimum wages (Sacramento, Santa Monica, West Hollywood) and we expect more action on the municipal level in this area.

We will continue to keep you abreast of all key developments on both of these far reaching developments.

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Six ways employers can spend a lot less time in court

August 24, 2015

“An apple a day keeps the lawyer away.” Here are six easy and inexpensive things that employers can do to minimize their risk of being sued and maximize their chances of victory if they do get sued. None of these involve major expense, or even the use of lawyers.

“These tips will take away your pain.”

Err on the side of treating your workers as (a) non-exempt and (b) “employees.”

Let this be your default position. Don’t forget that salaried workers, such as clerical employees, may be non-exempt, too. And, in a recent blog I discussed the risk of using “independent contractor/employees.”

A good general rule is that if you do want to classify someone in a gray area as FLSA-exempt or as an independent contractor, consult with an employment lawyer first. Otherwise, assume that the worker is a non-exempt employee. (Of course, you’ll also want to make sure that your non-exempt employees post their time accurately and aren’t being encouraged to work off the clock.

Avoid creating the impression that you play favorites.

Favoritism isn’t illegal, but it often leads to claims of discrimination, which is illegal. Remember to be “fair, firm & consistent” when dealing with your employees.

Keep your employees in the loop.

You may think your employees don’t care about what’s happening with your company and your industry, and some probably don’t, but tell them anyway. When people don’t have good (or any) information, their imaginations run wild, they listen to gossip, they get paranoid, and next thing you know you’re being sued. Let your employees know the good and the bad. Give them an idea of what they might expect if “the bad” occurs. You obviously won’t be able to disclose everything, but appropriate sharing of information can be helpful in limiting employee anxiety.

Take employee complaints seriously. Take every complaint seriously when an employee makes a complaint, especially if it is about allegedly unfair treatment or inappropriate, improper, or illegal activity. At the very least, this means (a) documenting the complaint, (b) investigating the allegation and documenting your investigation, and (c) getting back to the employee with your findings and documenting that discussion. If you are able to substantiate the allegations, you may have to do a lot more. Don’t blow off a complaint like this, even if it comes from a “chronic complainer.”

Even a stopped clock is right twice a day.

Never fire an employee in anger.

If you’re irate, this is the time to suspend with pay pending a final decision, not the time to fire. Even if you’re totally in the right and already have an airtight case for termination that will stand up in any court, you don’t lose a thing by delaying the termination for a few days until you’ve had a chance to calm down and, if you need to, consult with some others who are more detached from the situation.

Many times you’ll be in the right, but additional investigation and more documentation will put you in an even stronger defensive position. And, once in a blue moon, it will turn out that you were wrong.

Terminating employees who fail to return on time from a medical leave of absence!

Never, ever, terminate an employee while on a medical leave of absence whether they have returned late or for not giving you continuing notice! Do not chance it. There are some states, like California, that have a higher standard than the Feds. Be very careful with this one.

Finally, a disclaimer. Even people who exercise and eat right have to go to the doctor sometimes. Doing these things (like the apple a day) will promote good employer “health,” but it doesn’t mean that you won’t get a charge or lawsuit from time to time, or have to consult with employment lawyers or your HR consultants. And if you operate in a heavily regulated area you should initiate a consultation no matter how good you “think” you are.


12 Tips For Limiting the Risk to Independant Contractor Misclassification

August 17, 2015

The federal and state government and plaintiffs’ attorneys are vigorously pursuing claims alleging misclassification of independent contractors.   Government agencies are getting more aggressive with their audits and we are seeing more and more class action lawsuits on the independent contractor classification.

Moreover, the law applied by governmental entities is shifting.  Rather than focusing on whether the company “controls” the worker, the California Labor Commissioner, as reflected in its recent decision in Uber v. Berwick, and the U.S. Department of Labor are now focusing on whether the worker is an integral part of the company’s business and whether the worker is truly operating an independent business.  In our view, this shift makes it more difficult to lawfully classify workers as independent contractors.  Adding to this shift by the governmental agencies, the  California Court of Appeal ‘s recent decisions in Dynamex v. Superior Court, in which the court applied a very broad definition of “employ” and “employer” making it virtually impossible to classify a worker as an independent contractor, and Garcia v. Seacon Logix, Inc., holding that “lease agreement” truck drivers are employees and not independent contractors, illustrate that long standing assumptions about what type of workers are independent contractors are not always going to be upheld.

While the California Supreme Court is reviewing the Dynamex decision, these developments, taken together, show the importance of assessing, and re-assessing, whether workers are properly classified as independent contractors.  With that in mind, here are 12 tips for analyzing the independent contractor issue and reducing your company’s related risk:

  • Do not assume all workers may be classified as independent contractors.  Constantly re-assess the classification given the current law and changing work duties and circumstances of the workers;
  • Have a written agreement for services with the contractor;
  • Allow the contractor to take other jobs – specifically state so in the agreement;
  • Do not provide the contractor with tools, equipment or supplies;
  • Pay the contractor with results driven compensation – by the job (no guarantees or payments for services not performed and do not pay hourly);
  • Limit the term of the contract to no more than 1 year; the less time the better;
  • Train your employees to communicate properly with contractors and make sure they are not directing the means of how the work is performed;
  • Do not provide the contractor with bonuses or benefits;
  • Terminate contractors only for material breach or with 30 days’ notice;
  • Review whether the contractor has a separate business license, insurance coverage, and contracts with other entities;
  • Do not use contractors to perform functions that are integral to your business or involve direct service to your customers; and
  • If you use contractors, try to make sure that you do not have employees performing the exact same function.

Finally, when in doubt, err on the side of employee classification.  We will continue to you keep you posted of important developments in the area of independent contractor classification as they unfold.


Threats by Employees and a “Reasonable Accommodation” under the ADA

August 10, 2015

Many of us, including me, know of a friend or a loved one who has suffered through mental illness. With proper treatment, counseling and support, the symptoms may be controllable. However, sometimes medication and treatment aren’t enough and the question becomes “What happens when an employee who suffers from mental illness threatens a staff member?”

Now, before we go any further, let’s clarify something. We receive calls from clients whereby the client has determined that an employee “must have a mental illness of some sort” and wants to tell the employee that they need to seek help. If the employer/manager does not have any professional training in this area we highly recommend not going down that path. We recognize that mental illness, which generally qualifies as a disability under the Americans with Disabilities Act, can disrupt the workplace. And, it can create a big problem where the employee is a threat to himself or others. There is a solution.

Threats at work can lead to a suspension, police can be called, hospitalization, and termination are all possibilities.

In one such set of circumstances (Mayo v. PCC Structurals) the plaintiff suffered from major depressive disorder. For many years, through medication and treatment, he worked without incident. However, in 2010, a supervisor supposedly bullied Mayo and a few co-workers. After Mayo complained, he supposedly threatened to kill the supervisor, management, and other employees.

After HR was made aware of these threats, the Senior HR Manager met with Mayo who, when asked if he planned to carry out his threats, said that “he couldn’t guarantee he wouldn’t do that.”

The police were called, Mayo was suspended, and, ultimately, hospitalized for two months. During his hospitalization, Mayo used FMLA leave. Toward the end of this leave period, a doctor cleared Mayo to return to work. Mayo also indicated that he wanted to return to work. However, the parties disagree as to whether Mayo promised that he would not repeat his threatening behavior. The company fired Mayo.

Direct threat trumps duty to accommodate.

Under the ADA, an employer must provide a reasonable accommodation to an employee with a disability if doing so will enable that individual to perform the essential functions of the job. However, there are limits. For example, an employer may refuse to employ an individual who poses direct threat to the health or safety of others. Thus, the mere potential for future violence is enough.

Additionally, as the Ninth Circuit Court of Appeals determined, when an employee actually threatens harm against another employee, that employee is not qualified to perform the essential functions of the job:

Even if Mayo were disabled (which I assume for this appeal), he cannot show that he was qualified at the time of his discharge. An essential function of almost every job is the ability to appropriately handle stress and interact with others. And while an employee can be qualified despite adverse reactions to stress, he is not qualified when that stress leads him to threaten to kill his co-workers in chilling detail and on multiple occasions (here, at least five times). This vastly disproportionate reaction demonstrated that Mayo could not perform an “essential function” of his job, and was not a “qualified individual.” This is true regardless of whether Mayo’s threats stemmed from his major depressive disorder. 

Disability or not, do not tolerate threats of violence.

When an employee threatens to harm a manager or another co-worker, take those threats seriously! Contact the police, remove that employee from the workplace, and end the employment relationship after a complete investigation with witnesses and statements. Do not give that employee a chance to follow through on his threat if you do, and he/she has had similar behavior in the past, you can possibly be sued for negligent retention not to mention a workers comp claim for the injured worker.


Retaliation Claims Based on Timing are on the Rise!

August 3, 2015

Retaliation claims of any variety are becoming explosive for employers. Nothing angers jurors, courts or governmental agencies like an employee’s accusation they were fired in retaliation for exercising their rights or “doing the right thing.” Ultimately, a jury, court or agency must decide: “What was the employer’s true reason for firing the employee?” The Equal Employment Opportunity Commission has reported a dramatic increase in the number of retaliation claims. One recent case is a clear example of a few of the factors that come into play when an employee accuses an employer of retaliatory motivation.

Unreported sexual abuse complaint

For more than three years, an employee worked as a nursing home health care administrator for a community retirement home. There was an executive director, and a director of nursing. The employee’s performance evaluations had been satisfactory; she consistently received “meeting expectations” or “exceeding expectations” ratings. The employee had never been disciplined by her employer.

As provided by the Family and Medical Leave Act, the employee took maternity leave to care for her newborn child from October 2011 until January 9, 2012. What she found upon her return to work was troubling for her.

On January 4, 2012 – five days before the employee returned from her FMLA leave – a resident alleged they had been sexually abused by a male employee, a nurse’s aide working for the retirement community. In the past, this same male employee had been accused of sexually inappropriate behavior towards another staff member. The employer was also aware that this same male employee had pled guilty to an assault and battery charge.

The Department of Health regulations required retirement communities like this employer to report to the Department any allegations of resident abuse or neglect. Yet, when she resumed her job on January 9, the female employee (Administrator) returning from her leave discovered the employer had not made the required report and immediately investigated the resident’s complaint against the male employee. On January 13, the returning female employee as part of her job as the administrator reported the abuse allegation to the Department of Health. In her report, she was particularly critical of the Director of Nursing. She believed the Director of Nursing had given the male employee special treatment based upon their friendship. When the female returning from leave suggested to Executive Director that the Director of Nursing should be disciplined for failing to timely report a resident’s allegation of sexual abuse, the Executive Director accused the returning employee of trying “to reestablish her territory” after returning from her maternity leave. The Executive Director instructed the returning employee to “be more supportive of the Director of Nursing.”

Eleven days later, the Executive Director fired the employee who had just returned from her leave. Did she not see a lawsuit coming!

The former employee/Administrator, sued the employer over her discharge on two grounds. First, she claimed her firing amounted to wrongful discharge in violation of public policy. Specifically, she accused her former employer of firing her in retaliation for reporting the resident’s complaint against the male employee. Second, she accused her former employer of firing her in retaliation for having taken FMLA leave.

The employer denied the discharge had anything to do with reporting the resident’s complaint or her maternity leave. According to the termination document, she had been fired based upon a lack of fit in the employer’s “culture” and failure to display actions that support their mission statement. Not exactly a monument to detail and specificity. The termination document also referred to previous counseling she had received. The former employee denied she had been previously counseled and accused the employer of creating the documentation after she filed her lawsuit. The former employee pointed out that, contrary to the employer’s practice, the underlying documents had not been signed by her or a member of the employer’s human resources staff. The Executive Director eventually acknowledged that the former employee had never been disciplined prior to her firing. Based on these facts, the court determined the former employee’s retaliatory discharge claims should be decided by a jury.

Lessons about retaliation claims

All claims of retaliatory discharge turn on the employer or supervisor’s motivation. Did the employer fire the employee based on their protected activity – here, reporting the resident’s complaint and/or taking FMLA protected leave – or was the employee legitimately fired based on other, non-retaliatory reasons? A number of facts made the employer’s discharge of the former employee risky:

  • Timing. The employee was fired 11 days after reporting the complaint to the Department of Health and 15 days after returning from her FMLA leave. Come on!!
  • Previous performance history. The former employee’s employment history was marked by favorable performance evaluations and no instances of prior discipline.
  • Contested documentation. The former employee’s challenge to the accuracy and creation of the termination paperwork was effective.

Understand that firing an employee who has engaged in a protected activity bears greater risks than other discharges. Before making a discharge decision, take the time to assess the particular circumstances. Consider factors such as timing and the employee’s performance history. And make sure the supporting documentation is accurate!

Timing is everything with retaliation claims. This is why we encourage clients not to jump at opportunities to fire someone if they have slipped into a protected class group such as a person returning from a leave of absence.