Some Reminders For Employers In Difficult Financial Times

Frank Roche, over at KnowHR, reminds employers the 10 Things HR Needs to Do in an Economic Downturn.  Here is a summary of Frank's points:

  • Get up, walk out of HR, and talk to the people running operations.
  • Fix your friggin sales comp once and for all.
  • Take a deep look at your performance management system.
  • Ask not what your company can do for HR, but what HR can do for your company.
  • Fell the deadwood.
  • Comfort the afflicted, and afflict the comfortable.
  • Listen to comp consultants who link metrics to company performance.
  • Let employees know what you know.
  • Pay lots of attention to your top talent.
  • Do something.

Click here to read the entire post.  Frank's final point, that employers need to "do something" is a good reminder that employers should not approach difficult periods without a plan.  When difficult decisions are made on the fly, that is when a company can expose itself to liability. 

Wal-Mart's Wage And Hour Issues Continue In Massachusetts

The Supreme Judicial Court of Massachusetts reversed an order decertifying a class of current and former Wal-Mart hourly workers who claimed that Wal-Mart failed to provide meal period and rest breaks as required by law. Salvas v. Wal-Mart (Mass. 9/23/08) The Court held:

We conclude, inter alia, that the judge abused his discretion in allowing Wal-Mart's motions to exclude the testimony of the plaintiffs' expert and to decertify the class. We further conclude that the judge erred in granting partial summary judgment to Wal-Mart. We remand the case for the entry of an order certifying the class and for further proceedings consistent with this opinion.

This overturns one of Wal-Mart’s few victories, and I have to agree with Michael Fox (not the actor) that this opinion will probably generate more wage and hour class action litigation – and not just here in California.


New Appellate Case Upholds Independent Contractor Status

Appellant Al Varisco sued Gateway Science and Engineering for wrongful termination of employment and similar causes of action. In order to sue under these legal theories, Varisco had to establish that he was an employee, not an independent contractor as Gateway contended.

The trial court agreed with Gateway that Varisco was an independent contractor, and the appellate court affirmed this ruling. In its ruling, the appellate court provided a great analysis for employers who face the issue of whether their independent contractors are properly classified. The court began its analysis with the following:

Control is the principal factor in determining whether an individual worker is an employee or an independent contractor. "An independent contractor is 'one who renders service in the course of an independent employment or occupation, following his employer's desires only in the results of the work, and not the means whereby it is to be accomplished.' [Citations.] On the other hand, the relationship of master and servant or employer and employee exists whenever the employer retains the right to direct how the work shall be done as well as the result to be accomplished. [Citations.] But this rule requires that the right to exercise complete or authoritative control, rather than mere suggestion as to detail, must be shown. [Citations.] Also, the right to control, rather than the amount of control which was exercised, is the determinative factor." (S. A. Gerrard Co. v. Industrial Acc. Com. (1941) 17 Cal.2d 411, 413.)

Thus, the most significant question in the independent contractor/employee determination is "'whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.' [Citation.]" (S. G. Borello & Sons, Inc. v. Department of Industrial Relations (1989) 48 Cal.3d 341, 350.)

The appellate court continued to explain that there are “secondary indicia” of whether someone is an independent contractor. These factors are:

  1. whether the one performing services is engaged in a distinct occupation or business;
  2. the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
  3. the skill required in the particular occupation;
  4. whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work;
  5. the length of time for which the services are to be performed;
  6. (the method of payment, whether by the time or by the job;
  7. whether or not the work is a part of the regular business of the principal; and
  8. whether or not the parties believe they are creating the relationship of employer-employee. (citing Borello, 48 Cal.3d at p. 351.)

Base on these factors, the appellate court held that Varisco was an independent contractor. He received a 1099 for all his compensation from Gateway. Gateway did not provide any uniform, apparel, equipment, material, or tools to him. Varisco wore his own hardhat and work boots, mandatory apparel on the job site, and he testified that he provided his own equipment. He used his own car for transportation to and from the job site, and was not reimbursed for mileage or gas. Varisco was responsible for his own training, and did not receive any training from Gateway. His work hours were not set by Gateway, he only went to Gateway’s office twice a month to pick up his paychecks. Gateway did not have personnel at the LAUSD job sites. When issues or questions arose at the job site, he addressed them to the LAUSD architect, not Gateway. When asked "did Gateway give you any direction on how to perform your duties?" Varisco answered "no."

Varisco argued that because he was paid on an hourly basis, he should be considered an employee. Not persuaded by this argument, the court stated, “[a]n hourly rate traditionally indicated an employment relationship [citation] but independent contractors are now commonly paid on that basis. [citation].”

Finally, Varisco argued that he had an agreement with Gateway that provided the relationship was “at-will”, which supports his argument that he was an employee, not an independent contractor. The court, again, disagreed:

An independent contractor agreement can properly include an at-will clause giving the parties the right to terminate the agreement. Such a clause does not, in and of itself, change the independent contractor relationship into an employee-employer relationship. If it did, independent contractor arrangements could only be established through agreements which limited the right of a party, or perhaps both parties, to terminate the agreement. This would be absurd, and it is not the law.

Employers with independent contractors should take a look at the case for some guidance about whether their independent contractors are properly classified. The case, Varisco v. Gateway Science & Engin. can be downloaded as a PDF or in Word.

Mandated Executive Compensation Limits Appear Innevitable

In case you hadn't heard, the bipartisan economic bailout bill failed to pass the House today.  However, an article in is already opining that one politically popular aspect of the bill is destined to survive in any future bailout proposal -- namely, limits on executive compensation.

Under the failed bill, a firm would be prohibited from offering multimillion-dollar golden-parachute severance packages to newly hired executives in its top five positions if it sold more than $300 million in securities to the government in a public auction. The company would not be allowed tax deductions for executive compensation over $500,000 and would be penalized for giving golden parachutes to fired executives.

My understanding is that the intended enforcement mechanism would consist mainly of unfavorable tax treatment for executive compensation over the prescribed limits.  I have to wonder, however, if the ultimate legislation might also be read to create a private right of action -- such as a shareholder derivative suit -- to recover "excess" compensation.  If so, Congress could be getting ready to spawn a whole new field of employment litigation.

Attorneys Using Social Networking Sites For Jury Selection

We have blogged and spoken quite a bit recently about using on line resources such as MySpace and Facebook for employment and recruiting purposes.  An interesting article in today's LA Times reports on another use for this information -- jury selection.

For example, Marshall Hennington, a psychologist who does work as a jury consultant relates how one prospective juror denied knowing a fellow jury candidate, but his Facebook page revealed the two were actually cousins.  The revelation apparently got the juror dismissed for cause.   As the article explains:

Hennington has no qualms about plumbing the Internet for information damaging to the opposition."They're not giving me a call because they have a slam-dunk case. Clients call me because they know they have a difficult case and need to sell it to the jurors," Hennington said. As long as the information obtained about a juror is publicly available and of use to a client, "everything is fair game," he said. "This is war."


ADA Amendments Act (ADAA) Signed Into Law -- Federal Disability Protections Broadened

It didn't get much press this last week -- what with the economy collapsing in the midst of a presidential election -- but on Thursday President Bush signed the ADA Amendments Act (ADAA) into law.  The legislation will take effect on January 1, 2009 and will significantly broaden the federal definition of the "disabilities" that require accommodation under the ADA.

The new legislation preserves the traditional verbal formula that a covered disability is one which "substantially limits one or more major life activities."  However, Congress has now expressly changed the meaning of these words to expand the number of employees who will be covered by the ADA.  For example:

  • The term "disability" shall henceforth be interpreted broadly in favor of finding coverage under the Act.
  • A covered disability now includes any condition that "materially restricts" (rather than "substantially limits") a major life activity.  There is no telling what this new term is intended to means except that it is intended to be broader than the prior definition. 
  • An employees is now covered under the ADA whether or not he has a covered disability, so long as the employer "perceives" that he has an "impairment" that has an expected duration of more than six months.  
  • The employee's condition shall now be judged in its unmitigated state -- i.e., without regard to the effects of any corrective measures such as medications that would control the symptoms.

The main purpose of the legislation is to overturn a number of pro-employer Supreme Court decisions, including Sutton v. United Airlines, Inc., 527 U.S. 471 (1999), and Toyota Motor Manufacturing, Kentucky, Inc. v. Williams, 534 U.S. 184 (2002).  

Interestingly, the effect of these amendments will be to essentially conform the ADA to the already broadened disability protections of the California Fair Employment and Housing Act (FEHA). 

California Human Resources Networking Group - LinkedIn

I recently founded the California Human Resources Networking Group in LinkedIn. I’ve found that LinkedIn is becoming more and more popular with human resource professionals as well as legal professionals, so I created the group in order to promote HR related discussions specific to California.

To join, visit the California Human Resources Networking Group page in LinkedIn, or drop me an email and I will approve your request. There are no particular qualifications required to join - only a need for a better understanding of California's employment laws.

The group is devoted to discussing questions about human resource and other employment law issues that arise in California.

If you know of anyone else that would find the group beneficial, please send them to the group.

To get things started, I will be conducting a free webinar for the group in early October on how to use the Internet to conduct background checks on applicants and/or employees without creating liability for your company. More information to come.

Review of Overtime Obligations In California

Employers must review their payroll process from time-to-time to ensure that all overtime is being paid properly. Also, it is important for employers to conduct this analysis themselves – and not simply assume that their payroll company is doing it correctly.

When is overtime owed in California?

One and one-half times the employee's regular rate or pay is owed for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek. Double the employee's regular rate or pay is owed for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

Employers must remember that the regular rate of pay includes a number of different kinds of payments made to employees, such as hourly earnings, salary, piecework earnings, and commissions. Bonuses can also be considered in calculating an employee’s regular rate of pay if the bonus is a nondiscretionary bonus, which means when the bonus it is based upon hours worked, production or proficiency and not subject to the employer’s subjective determination. The DLSE provides a great question and answer section on overtime discussing some of the issues that an employer must take into account when calculating the employee’s regular rate of pay.

Can an employee agree not to be paid overtime by way of working an alternative work week?

An employee cannot simply agree to work over eight hours a day or more than 40 hours in a week without being paid overtime.  The employer must follow a complex set of rules to establish an alternative work week, for example, permitting an employee to work 9 hours a day four days a week, and have either a half day or a full day off every other Friday, without having to pay overtime for the 1 hour of work over 8 hours worked in a day.  In order to establish a legal alternative workweek the employer, among other items, must define a “work unit”, propose the alternative work schedule to the work group, distribute a written disclosure, have a meeting on the issue, hold a secret election, and file the election results with the Division of Labor Statistics and Research.  Furthermore, employers who have established an alternative workweek have greater record keeping requirements.

Now On Twitter

I've been on Twitter for awhile, but only recently became more active with the site.  Click here to follow me through twitter.  I am going to try to post any updates on California employment law in twitter, as well as this blog. 

I highly recommend using Tweetdeck to make twitter more useful.  This software makes Twitter 100 times more user friendly.  Just within the last couple of months, the discussions on twitter have multiplied.  If you deal with California HR issues, Twitter can be a useful resource. 

Still trying to figure out Twitter (like the rest of us) - click here for a good video describing Twitter

Employers Face a High Burden to Accommodate Returning Employees: Nadaf- Rahrov v. Neiman Marcus Group, Inc.

On September 10, the First District Court of Appeal issued what I believe is the very important disability discrimination case of Nadaf- Rahrov v. Neiman Marcus Group, Inc.  The decision is important not because it alters pre-existing disability law, but because it applies the law to the most common scenarios and real-life issues faced by employers and employees.  

The case involved a clothes fitter at Neiman Marcus who had gone out on a medical leave because she was "unable to work" according to a doctor's note.  When her leave expired and she did not submit a release to return to work she was terminated.  The trial court initially granted summary judgment to Neiman Marcus on the grounds that the plaintiff was still unable to perform the "essential duties" of her job.

The appellate court reversed, however, on the ground that Neiman Marcus had not done enough to investigate the plaintiff's actual condition or to explore potential alternate positions.  The Court noted that the employer does not have to offer a substitute job that would constitute a "promotion."   But otherwise, the appellate decision merely illustrated how exhaustive the employer's efforts must be if it expects to avoid legal liability.  For example:

  • The employer cannot avoid looking at alternate positions merely because a doctor's note states that the employee is "unable to work."  This language can be interpreted to mean that the employee is only unable to perform her original job, and may not apply to all potential substitute jobs.  
  • The employer must consider all vacant positions that the worker could perform.  For example, clerical jobs must be considered for employees who formerly performed only physical duties.
  • The employer must consider positions that are not yet vacant.  In other words, extending the employee's leave until a new position opens up is part of the "reasonable accommodation."
  • The employer must consider vacant positions at other facilities and locations.  If the employee signals a willingness to relocate, this may conceivably require a nationwide search for vacant positions that the employee could perform.

Satisfying this type of internal job search may not be easy or convenient but it is imperative to avoid liability under the ADA or the FEHA.  The lesson for employers is to never assume anything about the employee's condition or the nature of substitute positions without a specific, diligent investigation.         


Online Resources Help with Work Visa Information

We frequently field questions from clients about work permits for their foreign national employees.  It is a complicated area.  Many employers may have a passing familiarity with the standard "green card" Visa, the H1-B Visa program  for highly skilled workers, or the L-1 Visa for employees who are on transfer from one of the employers foreign offices.  But they may be surprised to learn that there are nearly 60 different types of non-resident visas available.  For example, I recently learned that there is a special TN1 Visa for Canadians which was created as part of the NAFTA treaty.  For more information on all of these programs (as well as permits from foreign governments for Americans working abroad), I highly commend the site, which contains a wealth of useful information as well as links to attorneys specializing in this area.

U.S. Supreme Court Clarifies Test for "Disparate Impact" Age Discrimination in Meachum v. Knolls Atomic Power

It is not enough for employers to avoid deliberate discrimination against members of protected groups when selecting employees for layoff.  In addition, they must avoid inadvertently using any selection criteria that tend to have a "disparate impact" on a particular group.  

In Meachum v. Knolls Atomic Power Lab., the U.S. Supreme Court made it harder for employers to disprove this type of discrimination claim -- which is sometimes referred to as "negligent" or "unintended" discrimination.  As the Court explained, under the federal Age Discrimination in Employment Act (ADEA), it is the employer's burden to affirmatively prove that any statistical disparate impact against older workers is actually the result of a "reasonable factor" not tied to age.  

Disparate impact cases usually turn on conflicting expert analysis of the statistical data.  Having to carry the burden of persuading a jury on these complicated issues will thus tend to place employers at a significant disadvantage.   For example, in the trial court, the plaintiffs were able to prevail by showing that the employer's performance rankings included scores for "flexibility" and "criticality" and that older workers did significantly worse on these criteria.

To show a disparate impact, the workers relied on a statistical expert's testimony to the effect that results so skewed according to age could rarely occur by chance; and that the scores for “flexibility” and “criticality,” over which managers had the most discretionary judgment, had the firmest statistical ties to the outcomes.

The lesson for employers is to always check the outcomes of layoff criteria before implementing the terminations.  A significant over-representation of any one group is a red flag that should result in a re-evaluation of the criteria. 


What Are Employers To Do In The Wake of Brinker v. Superior Court?

It was a pleasure conducting the presentation on “Meal and Rest Breaks in California: Why the Brinker Ruling Is Good News for Employers, and Where Caution is Still Required” through Business & Legal Reports.  It was wonderful to have such a large audience, as well as great follow-up questions.

I’ve had a lot of request for the concluding points I made about what employers should do while we are waiting for the California Supreme Court to determine whether or not it will review the Brinker v. Superior Court (Hohnbaum) decision.   So here are my concluding remarks I made during the presentation:

  1. Employers should continue to have a strict written policy on providing meal and rest breaks and continue to monitor that employees are actually taking meal breaks.
  2. Make sure management knows about and enforces these rules.
  3. Record meal breaks! This is already an obligation of California employers, and the Brinker decision does not change this obligation.
  4. Policies should require employees to come forward to report if they have been forced to work through a meal break.
  5. Brinker’s policies, which were found to be valid by the appellate court, are a good example of policies California employers should have in place.  For example, Brinker had a written policy titled “Break and Meal Period Policy for Employees in the State of California.” Brinker also required its employees to sign a form stating “I am entitled to a 30-minute meal period when I work a shift that is over five hours” and that “If I work over 3.5 hours during my shift, I understand that I am eligible for one [10-]minute rest break for each four hours that I work.”  Brinker’s policy also stated that an employee’s failure to abide by the policy could result in termination. The court held that this ultimately was sufficient under California law to “provide” meal and rest breaks, only if the defendant has taken steps to establish and communicate the policy. Then if an employee fails to take a meal or rest break voluntarily, the employer is not liable for damages.

Until we know whether or not the California Supreme Court will grant review of the Brinker decision, employers should definitely be taking proactive steps to protect themselves.


"Lipstick on a Pig" -- Stray Remarks as Evidence of Discrimination

As political pundits talked about lipstick and pigs over the last several days, it occurs to me that this latest round of political posturing bears more than a passing resemblance to the disputes that animate much employment litigation.

For example, before replacing an over-40 worker with an outside consultant a manager might be heard to say that the company needs some "young blood," or that you "can't teach an old dog new tricks."    So what, if anything, do such comments demonstrate?  The Defendant will argue these are just commonplace cliches being used to demonstrate an innocuous point -- i.e., that the Company needs "change."   The Plaintiff will argue that using these expressions is either intentional "code," or at least evidence of unconscious bias against older workers.

No one can read the speaker's mind and both sides have every incentive to stretch the interpretation as far as they can in their direction.  Because such interpretations are very factual and context-specific, however, judges are often inclined to let the jury make the call.  Thus, the difference between a pig and a pig with "lipstick," might be the difference between having a case dismissed on summary judgment and having it argued to a jury.



Religious Discrimination or Just Running a Business? -- Employer Fires Muslim Workers Demanding Prayer Breaks

According to a front page story in the Los Angeles Times today, JBS Swift & Co. has just laid off about 100 Muslim workers who walked off their jobs as a protest for not receiving prayer breaks.   The layoffs occurred in Colorado and will inevitably implicate a host of collective bargaining issues.   But I think the story is more interesting because of the issues of religious discrimination and accommodation that it raises.

Virtually all employers realize that it is illegal to discriminate against a worker because of his religion.  Far fewer are aware that the law also requires employers to make an affirmative "reasonable accommodation" for an employee's "sincere"  religious beliefs and practices.  This duty is very similar to the requirement under the ADA to modify non-essential job duties for disabled workers.  Thus, if an employee's religion prevents him from working certain days or shifts due to Sabbath or pilgrimage issues, an employer may be legally required to re-arrange schedules or allow time off.

As a general rule, however, the employer is not required to offer an accommodation that involves a significant cost, imposes undesirable shift preferences on other employees, or creates an "undue hardship" for the business.


Speaking at Research Security Administrators' Fall Seminar

I will be speaking at the Fall seminar sponsored by Research Security Administrators on October 7, 2008 in Fountain Valley California.  For those not familiar with RSA, it was founded in 1956, as a nonprofit regional security organization "concerned with all defense, technical, scientific, and social matters which have an impact on the security of the United States."

The Fall seminar is titled "Analyzing, Mitigating, Responding, and Managing Threats and Emergencies."   Below is the topic of my presentation, entitled “Legal Considerations: Privacy & Security in the 21st Century”:

The technologies available for combating security threats have increased dramatically. Electronic databases, monitoring of e-mail, surveillance, lie detection, and other tools are potent weapons. But they implicate serious legal restrictions that can compromise security efforts and result in lawsuits or even criminal prosecution. This presentation will explore how best to navigate the legal challenges inherent in security operations in the 21st Century, with a special emphasis on technology and privacy rights.

Petition For Review Filed In Brinker v. Superior Court

Plaintiff has filed a petition to the California Supreme Court requesting that it review the appellate decision in Brinker v. Superior Court (Hohnbaum) [as previously written about here and here]. The Supreme Court has at least 60 days to decide whether or not to grant review of the case – so until then the appellate court’s decision is still citable case law.

[Hat tip Wage Law]