August 17, 2006
Posted by Cal Labor Law in New Laws & Legislation
Posted by Kendra D. Miller
The DLSE has endorsed the position taken by the California Court of Appeal last year in Conley v. Pacific Gas and Electric Co., 131 Cal. App. 4th 260 (Cal. App. 1st Dist., 2005) that employers may deduct partial-day absences from exempt employees' accrued vacation/PTO banks for absences of 4 hours or more without jeopardizing their exempt status. The DLSE amended its Enforcement Policies and Interpretations Manual to reflect the Conley decision. See DLSE Enforcement Policies and Interpretations Manual § 126.96.36.199. This is a clear position reversal from that stated in a 2002 opinion letter which suggested that such deductions might jeopardize exemptions under the "salary basis" test and expose employers to significant risks of having to pay overtime to exempt workers.
The California Supreme Court's ruling last week in Dore vs. Arnold Worldwide, Inc. strengthens employers' ability to terminate employees without cause. The Court ruled that an employee's offer letter stating that his employment was "at will" and that his employment could be terminated "at any time," means what it says.
Dore, who was living in Colorado, began negotiations with AWI for a job based in Los Angeles. He claimed that during negotiations AWI had told him that it had a new account that someone was required to manage on a long-term basis, that he would "play a critical role in growing the agency," that AWI was looking for "a long-term fix, not a Band-Aid," and that AWI employees were treated like family.
After the negotiations, AWI sent Dore a confirming letter stating:
Brook, please know that as with all of our company employees, your employment with Arnold Communications, Inc. is at will. This simply means that Arnold Communications has the right to terminate your employment at any time just as you have the right to terminate your employment with Arnold Communications, Inc. at any time.
When Dore was later terminated without cause, he attempted to argue that the language in the offer letter was ambiguous because it failed to specifically mention whether his termination could be with or without cause. Furthermore, he argued that there was an implied-in-fact contract that arose out of the comments made to him about the stability of his job, leading him to believe that he could only be terminated for cause.
The Court dispensed with Dore's argument that the letter was ambiguous:
We disagree with Dore that the verbal formulation "at any time" in the termination clause of an employment contract is per se ambiguous merely because it does not expressly speak to whether cause is required. As a matter of simple logic, rather, such a formulation ordinarily entails the notion of "with or without cause.
The Court continued to explain:
An at-will employment may be ended by either party 'at any time without cause,' for any or no reason, and subject to no procedure except the statutory requirement of notice." (Guz v. Bechtel National, Inc., supra, 24 Cal.4th at p. 335.) For the parties to specify--indeed to emphasize--that Dore's employment was at will (explaining that it could be terminated at any time) would make no sense if their true meaning was that his employment could be terminated only for cause. Thus, even though AWI's letter defined "at will" as meaning "at any time," without specifying it also meant without cause or for any or no reason, the letter's meaning was clear.
The majority's ruling is very helpful for employers who have clear "at-will" language in either their new hire packages and/or employee handbooks. However, Justice Moreno also notes in a concurring opinion that language authorizing termination "upon notice," or after a specified notice period could leave the door open for an implied-contract argument.
The employer in Dore used seemingly clear language in its offer letter yet it had to go all the way to the California Supreme Court to have this language enforced. This ruling should be a reminder to employers in California to review the language contained in the offer letters, employee handbooks, and other documentation setting forth the status of employment to ensure that there is no room for doubt concerning the at will status of their employees.
August 3, 2006
Posted by Cal Labor Law in Wage & Hour Issues
The Estate Tax and Extension of Tax Relief Act of 2006, H.R. 5970, which passed the House on July 29, 2006 and is now in front of the U.S. Senate, proposes to raise the national minimum wage to $7.25 over a three year period.
The provision of the bill that would permit employers across the country to credit tips earned by employees against the minimum wage requirements is one of the many issues that are being debated currently. Below is an explanation of the tip credit and some possible ramifications for California employers and employees.
All But Seven States Permit Tip Credits
All but seven states currently permit employers to count the amount tipped employees earn in tips towards their minimum wage. The seven states that do not allow tip credits are: Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington. H.R. 5970 proposes to bring California and the other six states into conformity with the rest of the country by requiring all states to recognize a tip credit.
What Is a Tip Credit?
Under federal law, employers are allowed to pay a lower hourly wage to employees who qualify as a tipped employee so long as the employee's total wages (the lower minimum wage paid by the employer and the tips received) equal at least the standard federal minimum wage, currently $5.15 per hour. To qualify as a tipped employee, the employee must earn more than $30 per month in tips. Under current federal law, if the employee meets these requirements, then employers may pay them $2.13 per hour, instead of the $5.15 standard minimum wage per hour. Contrary to many politicized statements on this topic, a tipped employee is still guaranteed to make minimum wage.
Many states have different requirements that are more employee-friendly than the federal tip credit law, and therefore the state law is applicable even if the Senate bill is passed. Click here for a chart describing the state requirements. Click here for a Department of Labor "Fact Sheet" pertaining to tipped employees.
How Would the Senate Bill Impact California Employers and Employees?
Currently in California, employers must pay tipped employees the full state minimum wage of $6.75 per hour, and cannot offset any of this amount by the employee's tips. If the bill passes, employees will still be guaranteed to earn at least the state minimum wage. The only difference is that the tips earned by employees could then counted towards the $6.75 per hour minimum wage amount. For example, if the bill passes, California employers could pay tipped employees $2.13 per hour so long as the employee earned at least another $4.62 per hour in tips ($2.13 + $4.62= $6.75). If the tipped employee does not earn enough tips to reach the $6.75 minimum wage threshold, then the employer will have to pay the difference to guarantee that the employee makes at least $6.75 per hour.
"Controversy" Surrounding the Tip Credit Provision
Some politicians, mostly Democrats, oppose the tip credit language in the bill because they argue it constitutes a wage reduction for tipped employees in the seven states that do not have a tip credit. However, the rationale for the minimum wage was to set the minimum that workers earn in the United States, and tipped employees are not minimum wage earners. The U.S. Bureau of Labor Statistics report that "Food Preparation and Serving Related Occupations" nationally earn on average $8.55 per hour as of May 2005, as reported here.
In California, these same employees earn on average $9.17 per hour as of May 2005, as reported here. On both the national level and in California, tipped employees who work in restaurants are paid well above the applicable minimum wage. Moreover, tipped employee's "wages" increase each year when restaurants raise their menu prices because tips left are based on a percentage of the total bill, unlike minimum wage earners who do not receive tips.
Furthermore, employers must pay payroll taxes including FICA (social security tax), SUTA (state unemployment taxes) and FUTA (federal unemployment taxes) on employee tips. Since employers must contribute their share of payroll taxes on these amounts, they should get credit for having paid these amounts towards an employee's minimum wage. This was the rationale for having a tip credit in the 43 states that recognize a tip credit.
Having a tip credit in California could also help equalize the disparity in wages often seen between the tipped employees and the "back of the house" employees. For example, cooks are often paid much less per hour than servers, and, ironically, are prohibited by California law from participating in tip pools (tip pools are different than the topic of tip credits - click here and here for prior posts on tip pools under California law). So unlike servers, they do not have the benefit of receiving additional income from patrons. If permitted to apply a tip credit to a server's minimum wage, a restaurant owner would have more resources he or she could redistribute to other staff members who are currently prohibited from participating in tip pools under California state law.
It is uncertain whether this bill will pass the Senate, but whether it does or not, the issue of a tip credit for employers in California will be hotly debated for some time to come.
UPDATE: The Senate failed to pass the minimum wage increase bill on Thursday, August 3, 2006. Click here for article.
July 28, 2006
Posted by Cal Labor Law in Court Decisions
A jury in Placer County recently came back with a $17.3 million defamation verdict in a defamation lawsuit brought by Sutter Health against UNITE HERE, one of the nation's largest unions. The big verdict highlights the increasing move of organized labor away from grass roots organizing of workers and toward so-called "corporate campaigns" designed to pressure Corporate leaders and shareholders. Traditionally, unions would achieve recognition by persuading workers that union representation was in their interests and attempting to obtain a majority of support in a recognition election supervised by the National Labor Relations Board.
As the popularity of union membership has dwindled, however, large unions have been increasingly unable to achieve majority status in contested, free elections. To maintain their financial viability, which depends on a steady supply of dues-paying members, unions are more likely now to try to forego the election process altogether by pressuring the employer to simply recognize them as the exclusive bargaining agent for the workers.
Why would an employer agree to this? That is where the union's "corporate campaign" comes into play. A "corporate campaign" merely refers to a coordinated strategy of pressuring corporate managers and shareholders that it is healthier for their bottom line to simply accede to union demands rather than endure the continued attacks. The following are some of the pressure tools most frequently used as part of a corporate campaign.
- Encouraging media reports that damage the Company's goodwill and criticize its products and business practices.
- Encouraging and financing civil litigation, including class action lawsuits for alleged discrimination and Labor Code violations.
- Lobbying state and local lawmakers to enact laws and ordinances that are against the Company's interests.
- Obstructing Company projects with zoning or environmental objections.
Typically, the union attempts to distance itself from these activities by using various front organizations, often nominally established as tax-exempt, non-profit "educational" groups. If the Company brings a legal challenge, the Union or its affiliated front group will typically argue that its conduct is privileged under the First Amendment.
In the Sutter Health case, however, the jury decided that the Union's hard-ball tactics had crossed the line. In particular, the Union mailed out thousands of post-cards to expectant mothers telling them that if they gave birth at a Sutter Health hospital they could become infected from linens contaminated by "blood, feces and harmful pathogens."
The jury's $17.3 million did not include any award of punitive damages and was intended to compensate the hospitals for their financial losses. The Union has vowed to appeal on grounds that its conduct was protected by the First Amendment and that a higher standard for proving defamation should apply in cases involving a "labor dispute."
Diane Pfadenhauer, over at Strategic HR Lawyer, has a great post reminding employers to think twice about deducting business costs from an employee's pay check. In her post, she refers employers to review the U.S. Department of Labor's opinion letter regarding these types of deductions. Click here to read her post.
In California, state courts have clearly held that employers cannot legally deduct costs that result from simple employee negligence, such as shortages and other losses occurring without the fault on the part of the employee. Business must simply write these losses off as business expenses. However, businesses may deduct an employee's wages for losses that resulted from a dishonest or willful act or through the gross negligence of the employee. The California Division of Labor Standards and Enforcement's (DLSE) explanation of what types of deductions are permissible under California law can be found here.
July 27, 2006
Posted by Cal Labor Law in Employee Hiring, Discipline & Termination
In defending against wrongful termination lawsuits based on poor employee performance, employers need to have the employee's performance well documented.Joe Jotkowitz at the Executive Advisory provides some great advice for employers on how to manage employees' performance through performance reviews. Joe recently developed great materials (found here) that will help managers give employees useful feedback on their performance. He notes the following about performance reviews:
Joe's advice is excellent for employers, and the tools he provides helps managers have these tough, but necessary conversations with employees. While increasing employee performance and morale through good management principles by providing clear feedback with concrete examples about what an employee needs to improve will also help a company avoid litigation or to defend itself if litigation ensues. The performance reviews also need to be well documented and maintained in the employee's personnel file.
Are these conversations easy? Absolutely not. However, the risk we run by not having them is even more critical. When we avoid difficult conversations, we risk three possible employee reactions:
So, minimize your risk and talk to your directs today... and more regularly. These types of conversations are great to have within 24 hours of specific events where feedback is necessitated or on a frequent basis (e.g., monthly, quarterly, or bi-yearly). As a matter of fact, right now is the perfect time for a mid-year check-up.
- Fight: Employees are more likely to become defensive and argue with us.
- Flight: Employees are more likely to become upset and leave the organization.
- Fright: Employees are more likely to be stunned and paralyzed and not know what to do.
July 26, 2006
Posted by Cal Labor Law in New Laws & Legislation
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July 25, 2006
Posted by Cal Labor Law in Employee Leave
As part of its monthly "HR Roundtable" series, Carothers DiSante & Freudenberger recently hosted seminars in Los Angeles, Irvine and San Diego to educate HR professionals about handling employee leave issues. The seminars covered the often confusing interplay between the various California and federal leave laws, including the Family and Medical Leave Act ("FMLA"), the California Family Rights Act ("CFRA"), the Pregnancy Disability Leave law ("PDL"), and the new "Kin Care" and "California Paid Family Leave" laws.
The following are a few of the more challenging questions posed by seminar participants:
Q: If an employee has elective surgery that is not medically necessary, can that constitute a "serious health condition" entitling the employee to leave under the FMLA or CFRA?
A: "Yes." Neither statute contains an exclusion for elective procedures, such as cosmetic surgery. Thus, so long as the procedure (including the recovery process) involves a course of ongoing medical treatment or "incapacity" that is sufficient to meet the definition of a "serious health condition" the leave rights under the statutes are triggered. It is true, however, that an employer can require up to 30 days' advance notice when the employee has discretion over when the procedure is scheduled.
"Kin Care" Leave
Q: Under California's "Kin care" law (which generally requires that employers authorize the use of up to half of an employee's paid sick leave for the care of sick family member), if an employee gets 10 days a year of paid sick leave and uses 8 of the days for his own illness, would he only have two sick days remaining? Or, if he needed to care for a family member, would the employer be required to give him an extra three days of sick leave so that he can actually use a full five days of sick leave for kin care?
A: The employee would have only two days of paid sick leave left to use. This is because the statute (Labor Code § 233) only applies to paid sick time that is already "accrued" and "available" for use. The statute does not require employers to give extra days of paid sick leave that would not otherwise accrue under the employer's existing policy. Thus, since the employee in the example is only allowed to accrue a maximum of 10 paid sick days per year, the Kin Care law would not give him any additional sick days and he would have only two remaining (regardless of whether he uses them for his own illness or to take care of a family member).
Q: If a company has a policy that provides for salary continuance for pregnancy disability but not for other temporary disabilities, could it have potential discrimination issues?
A: "Probably Not," but this is a controversial area in which employers should tread carefully. In its famous (some would say "infamous") 1976 decision in General Electric Co. v. v. Gilbert, the United States Supreme Court held that discrimination on the basis of pregnancy is not a form of gender discrimination under Title VII. Rather, according to the Court, it is merely discrimination between pregnant and non-pregnant women. Thus, providing extra benefits for pregnant women -- basically a form of "affirmative action" for pregnant employees -- would not support a Title VII claim of gender discrimination by male employees. California law, on the other hand, expressly equates pregnancy discrimination with gender discrimination. But California law would not apply if, as is usually the case, the company's temporary disability plan is governed by ERISA, which precludes the application of state law to plan benefit decisions.
If you would like to request a copy of the written handout from these seminars, entitled "Medical Leaves: How to Avoid Lawsuits by Navigating the Maze of State and Federal Law," or if you would like information about upcoming seminar topics and dates, send an e-mail request to Cal Labor Law.
Caveat: Reasonable legal minds may differ on many of these issues and you should always consult an attorney about the particular facts and circumstances of a particular situation.
July 21, 2006
Posted by Cal Labor Law in Court Decisions
A federal judge on Wednesday overturned a Maryland law that would have required Wal-Mart to spend more on employee health care, arguing the retail giant "faces threatened injury" from the law's spending requirement. Click here for article.
California employers should carefully follow the outcome of this case in Maryland. There is similar proposed legislation in California. Click here to read a prior post. "The decision sends a clear signal that employer health plans are governed by federal law, not a patchwork of state and local laws. It also is a clear message that similar bills under consideration in other states and municipalities violate federal law as well," Sandy Kennedy, president of the Retail Industry Leaders Association, told Reuters.
The Maryland law requires large employers to spend at least 8 percent of payroll on health care or pay the difference in taxes and only Wal-Mart is impacted by the law. The proposed California legislation, very similar to Maryland's overturned law, would affect about 70 California employers that have more than 10,000 employees.
July 21, 2006
Posted by Cal Labor Law in Court Decisions
Plaintiff filed a DFEH complaint, received a right-to-sue letter, and timely filed a complaint in state court. Her employer demurred to the complaint, claiming that plaintiff had not timely served it with a copy of the administrative complaint within sixty days (although she had timely served a copy of her state court complaint). The trial court sustained the demurrer, but the appeals court granted plaintiff's petition for a peremptory writ of mandate. The court concluded that the 2003 amendment to the FEHA (Cal. Gov't Code AASUNsect; 12962) only requires an employee to serve her administrative complaint on her employer when (a) it is filed for investigation (instead of seeking an immediate right-to-sue), and (b) when the complainant is represented by counsel. Wasti v. Superior Ct. (Ezratty), 2006 DJDAR 7638 (4th Dist., June 20, 2006).