Background Checks: Another Issue to Avoid!

January 30, 2017

It never stops! Recently, the Ninth Circuit Court of Appeals issued its opinion in Syed v. M-I, LLC, holding, on an issue of first impression, that an employer willfully violated the Fair Credit Reporting Act (“FCRA”) by including a liability waiver on the background check disclosure and consent form it provided to prospective employees.

The Ninth Circuit held that the FCRA expressly states that before obtaining a consumer report for employment purposes, an employer must disclose its intent to secure a consumer report for employment purposes and inform the consumer of his/her rights under the FCRA.  The FCRA states that this information must be provided in writing in a document “consisting solely of the disclosure.”  The FCRA goes on to state that the employer must obtain the consumer’s authorization to procure the report and that the authorization can be on the same document as the disclosure.

In this case, the employer had a disclosure and consent form, as required by the FCRA.  However, the employer’s form included a provision stating that the applicant signing the form agrees to release the employer from any and all liability stemming from its reliance on information derived from the consumer report.  The Ninth Circuit held that the inclusion of this liability waiver on the disclosure and consent form violated the FCRA’s express mandate that the disclosure consist “solely of the disclosure.”  The Ninth Circuit reasoned that the inclusion of extraneous information, such as a liability waiver, in the disclosure form violates the law.

Worse, the Ninth Circuit held, as a matter of law, that the employer’s violation was both “objectively unreasonable” and “willful” (thereby exposing the employer to statutory and punitive damages), even though this was an issue of first impression that no Circuit Court had before decided.

This case will only serve to promote more FCRA lawsuits against employers.  Employers may wish to review their background check disclosure and consent forms to ensure that they do not improperly include “extraneous” information and that they otherwise comply with the FCRA (and California law, as applicable).

Note: We have been receiving a number of calls regarding our “Violence in the Workplace Preparedness Program” which includes “Active Shooter Training” for all employees. Please email instead of calling to

When Employers Can Be Liable For Supervisors Conduct

January 23, 2017

Let’s clarify this business about employer liability for the actions of their supervisors and managers. Many of you have heard me preach this for years.

Employers are strictly liable for the actions of its supervisors, managers or agents under the doctrine of respondeat superior.  Here are five key concepts employers must understand about the liability that could be created by managerial employees.

  1. Respondeat superior holds employers automatically liable for actions by managers

The respondeat superior doctrine provides that “an employer may be held vicariously liable for torts committed by an employee within the scope of employment.”  As explained by the California Supreme Court in Patterson v. Dominio’s Pizza, there are “three policy justifications for the respondeat superior doctrine…prevention, compensation and risk allocation.”

  1. Employers liability for non-supervisory employees

Under California’s FEHA, the employer is strictly liable for harassing action of its supervisors.  However, an employer is only liable for harassment by a coworker if the employer knew or should have known of the conduct and failed to take immediate corrective action.

  1. Managers/supervisors under the respondeat superior doctrine

Under California’s FEHA, an employer is strictly liable for all acts of a supervisor.  A supervisor is generally defined as someone who has the discretion and authority to hire, direct, transfer, promote, assign, reward, discipline, direct, or discharge other employees or to recommend these actions.  See Government Code section 12926(t).

  1. Which entities may be considered the employer under the respondeat superior doctrine

 In terms of defining who is the employers, courts in FEHA cases have looked to “the control exercised by the employer over the employee’s performance of employment duties….This standard requires a ‘comprehensive and immediate level of `day-to-day’ authority’ over matters such as hiring, firing, direction, supervision, and discipline of the employee.”  FEHA also defines employer to mean “any person action as an agent of an employer, directly or indirectly….”  This means that people not directly employed by the company can still create agency liability for the employer.

Now a new dynamic is emerging which brings up the 5th issue.

  1. Issue: Can a franchisor be held liable for a franchisee’s supervisor’s conduct?

How far does the doctrine of respondeat superior extend when there are levels of agency, such as in a franchisor-franchisee relationship?  This was the issue addressed by the California Supreme Court in Patterson v. Domino’s Pizza.  The Supreme Court held that given the facts in that case, Domino’s Pizza was not liable for the franchisee’s manager’s acts.  The Supreme Court explained:

A major incentive is the franchisee’s right to hire the people who work for him, and to oversee their performance each day. A franchisor enters this arena, and becomes potentially liable for actions of the franchisee’s employees, only if it has retained or assumed a general right of control over factors such as hiring, direction, supervision, discipline, discharge, and relevant day-to-day aspects of the workplace behavior of the franchisee’s employees.  Any other guiding principle would disrupt the franchise relationship.

The Supreme Court did not hold the franchisor liable in the case because it did not “control the workforce, and could not have prevented the misconduct and corrected its effects.”  However, the Court issued a warning to franchisors:

A franchisor will be liable if it has retained or assumed the right of general control over the relevant day-to-day operations at its franchised locations that we have described, and cannot escape liability in such a case merely because it failed or declined to establish a policy with regard to that particular conduct.

Joint employer lawsuits are on the rise and employers need to be cautious of their business dealings with vendors. Make sure your agreements with your vendors include an indemnification clause covering your liability in the event you get dragged into a lawsuit based upon their actions, or inactions.


Can an Employer Dock an Employee’s Pay?

January 16, 2017

A frequent question that we are asked is, “Can I dock an employee’s pay when they break a known rule?” Well a recent interesting case came up where the plaintiffs were “adult dancers” and the owner of the “club” docked one of the dancers for “failing to fully remove all clothing, except for underwear, by the end of the first song when dancing on stage.” The dancers filed a class action lawsuit and of course the owner/defendant filed a motion to dismiss.

The Court denied the employer’s motion to dismiss the class action claim, concluding that the deductions fell under the definition of “defective or faulty workmanship,” for which some state laws prohibit without prior written authorization for the deduction. Here the plaintiffs had not given their authorization (why would they!).

Now, be mindful, although under the federal Fair Labor Standards Act (FLSA) employers can deduct for non-exempt employees employers need to be aware of a contradictory state law. This case was out of Wisconsin although some states may permit deductions in certain specific circumstances, none of which on their face cover disciplinary docking. That’s the key.

Moreover, this practice of deducting for any reason other than the required deductions also raises a question about deductions from exempt employees pay. Docking an exempt employee’s pay could jeopardize one’s exempt status. The FLSA only permits an employer to disciplinarily docking an exempt employee’s pay “for penalties imposed in good faith for infractions of safety rules of major significance,” or “for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules imposed pursuant to a written policy applicable to all employees.” Docking an exempt employee’s pay puts in doubt the exempt status of that employee and any other employees in the same job classification working for the same managers. You do not want to risk an employee’s exempt status under any circumstances, for fear of owing back overtime for any hours worked in excess of 40 for all work weeks for up to two (or even three) years. Such a mistake could prove very costly.

Employers who are considering docking employees as discipline for work rule violations should not do so without having their counsel draft a carefully worded document for employees to sign that explains the penalties and authorizes the deductions from their wages. Employers should also consider the effect such a program could have on employee morale and retention.

I am not an advocate of docking pay for disciplinary violations. Use written warnings and suspensions for continued violations of company infractions. When you start taking money from people it will raise an emotional response. A written warning they can relatively understand. Taking money out of their pocket they will never understand.

NOTE: I have put together a Violence in the Workplace Preparedness Program which includes active shooter training for all employees! I am putting my previous law enforcement background to work in a different manner. If interested give the office a call at 626-396-1070.


FMLA Ruling: Employee Failed to Give Proper Notice!

January 9, 2017

F-M-L-A: four letters that cast fear in the heart of any HR professional. So many rules to follow, so many ways to mess up and cost an employer. It’s not just an employer that has FMLA rules to follow, however. Employees also have rules that they must follow, or the FMLA will not protect their leave according to one recent case where an injured production operator was terminated for unexcused absences lost his FMLA claim because he failed to follow his employer’s attendance policy.

The employee had injured his neck in a slip-and-fall at work. He sought and obtained intermittent FMLA leave for the injury. The employer has an attendance policy that requires employees intending to be absent to use a call service to notify the company at least two hours before the designated start time. The employer uses a third party administrator to administer its FMLA leave. That TPA separately requires an employee on approved intermittent FMLA leave to report any FMLA absence within 48 hours of missing work; otherwise, the absence is unexcused.

The employee reported his FMLA absences to his employer using its call service, but failed to separately notify the TPA, which logged the absences as unexcused. When the employee amassed enough absences, the employer terminated his employment.

Of course the employee sued for FMLA interference and retaliation. The 6th Circuit affirmed the dismissal of his claims holding that the record did not permit even a prima facie case for FMLA interference because the employee neglected to notify the TPA (and therefore the employer) of his intent to be absent under his approved FMLA leave. In addition, the employee admitted to not notifying the TPA within forty-eight hours of missing work by phone or online.

It is important to note, there is a regulation that permits employers to deny FMLA leave for failure to comply with internal notice requirements “absent unusual circumstances.” Here the employee never offered evidence of unusual circumstances in his case nor did he alleged ignorance of the internal notice requirement.

While it may seem as if employees hold all the high cards in the FMLA poker game, employers are well within their rights to enforce attendance policies against employees who fail to follow their rules. Now, go check your attendance policies to see if they contain these types of notice and call-in rules, and, if not, consider implementing reasonable call-in requirements to help curb FMLA abuse and over-use. If the law allows you to take advantage of these policies, why not help level the playing field against a statute that, more often than not, favors the employee.

Now the disclaimer. Keep in mind the FMLA is Federal. Your individual State may have a more stringent law regarding leaves of absence. California is an example. I still am of the belief that employers have to be extremely careful when terminating employees when they have not returned or provided proper notice when out on a leave of absence.


Employees Must Be Offered Additional Hours Before Hiring? Maybe So!

January 3, 2017

Well, it’s a new year with new hurdles! Now there is a push on to implement a state-wide legislation (California Assembly Bill 5) which would require employers with 36 or more employees to offer additional work hours to existing part-time employees before hiring new employees (whether part-time, temporary, and/or through a staffing agency) or contractors, even when the hiring need is occasioned by the departure of an existing employee. It has already begun. On November 8, 2016, San Jose residents passed Measure E, known as the “Opportunity to Work” Ordinance.  The Ordinance, becomes effective on March 13, 2017. San Francisco also has a similar ordinance in place.

One of the expressed intentions of the Bill would be to prevent employers from hiring part-time workers in an effort to avoid providing health care and other employment-related benefits.  However, the practical effects of this Bill will be to reduce employment opportunities for companies and industries that may be seasonal, and reduce flexibility of employers to meet customer demands.

The Bill would require employers to offer additional work hours to existing employees who, in the employer’s “good faith and reasonable judgment,” have the skills and experience to perform the work. The Bill, consistent with the San Jose Ordinance, would require employers to use a “transparent and nondiscriminatory process” to distribute the hours of work among existing employees.

Of importance, it would appear that the Bill may not require an employer to offer the additional work hours to existing employees if doing so would require the payment of premium or overtime wages to existing employees.  The San Jose Ordinance does not apply to small businesses with 35 or fewer employees and it initially appears that the pending Assembly Bill 5 will not either (but who knows).  It should be noted, however, for chains and franchise-owned businesses, all employees of the chain or of all business owned by the franchisor, all employees are counted whether or not they are located in San Jose.  There is also a carve-out for collective bargaining agreement scheduling provisions (even though the Ordinance was sponsored by several labor unions).  San Jose employers may apply for a “hardship” exemption for up to 12 months (and discretionary 12-month periods thereafter) if the employer can demonstrate that it has undertaken in good faith all reasonable steps to comply, and that full and immediate compliance would be impracticable, impossible or futile.  Violation of the Ordinance would subject employers to administrative fines, civil penalties, and exposure to private lawsuits for lost wages, penalties, and attorneys’ fees. State-wide employers could expect the same if Assembly Bill 5 passes.

In addition, it appears that Assembly Bill 5, and consistent with the San Jose Ordinance, would require employers to keep records of work schedules and other documentation of compliance (e.g. the offers of additional hours of work to existing employees) before each new hire.  As usual employers would be prohibited from retaliating against any employee for asserting their rights to additional work hours.

I will continue to monitor the San Jose Opportunity to Work Ordinance and keep you updated as to any further developments with California Assembly Bill 5.