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.


Criminal Law Background Checks: An Update!

April 2, 2018

California’s Fair Employment and Housing Council (“FEHC”) has proposed new revised regulations addressing the state’s new ban-the-box and parental leave laws.  The regulations are not yet final or in effect, but are being considered by the FEHC and likely will be adopted, potentially with some modifications based on input from public comments and public hearings in the near future, with the first hearing scheduled for April 4, 2018.

Ban the Box/Criminal History Inquiry Regulations

You may will recall that last year, the FEHC adopted new regulations regarding the use of criminal history information in employment decisions.  Those regulations “encouraged” employers to conduct an individualized assessment of the relationship between a criminal conviction and the job sought.  Then, later last year, AB 1008 was signed into law, prohibiting employers from inquiring about an applicant’s criminal history at any time before a conditional offer of employment is made, and setting forth a specific procedure employers must follow if they ultimately intend to deny employment based on criminal history.  The FEHC has now proposed revised criminal history regulations to reflect the state’s enactment of the ban-the-box law.

For the most part, the proposed regulations simply incorporate the requirements of AB 1008 and combine them with the pre-existing standards for using criminal conviction information in employment decisions.  However, the proposed regulations provide some clarifying guidance in a couple of areas.  First, under AB 1008, if an employer makes a preliminary decision to deny employment to an applicant based on criminal history information, the law provides that the employer must give the applicant written notice and at least 5 business days to respond before the employer makes a final decision regarding employment.  The proposed regulations clarify that the 5 business days runs from the applicant’s date of receipt of the notice.  The proposed regulations further provide, “If notice is transmitted through a format that does not provide a confirmation of receipt, such as a written notice mailed by an employer without tracking delivery enabled, the notice shall be deemed received five calendar days after the mailing is deposited for delivery for California addresses, ten calendar days after the mailing for addresses outside of California, and twenty calendar days after mailing for addresses outside of the United States.”

Another area of clarification is on the subject of what type of information qualifies as evidence of rehabilitation or mitigating circumstances.  (AB 1008 provides that in response to a notice informing the applicant that the employer intends to deny employment based on a criminal conviction, the applicant may submit evidence challenging the accuracy of the conviction information and/or evidence of rehabilitation or mitigating circumstances.)  The proposed regulations provide that evidence of rehabilitation or mitigating circumstances may include (but is not necessarily limited to) “the length and consistency of employment history before and after the offense or conduct; the facts or circumstances surrounding the offense or conduct; and rehabilitation efforts such as education or training.”

We will keep you posted.

Note: Our Violence in the Workplace Preparedness Program is soaring to new heights! If interested send an email to paaerrep@aol.com to schedule a 15 minute appointment. Our Active Shooter training includes information to protect you at work and away from work.