Recent Developments in Employment Law

Dated: Nov 29, 2010

We are pleased to provide the following information to our clients and friends regarding recent legal developments affecting employers.

I. Legislation.

Another Mandated Leave for California Employees. Just in case you didn't think California's leave of absence laws were generous enough to employees, effective January 1, 2011, all California employers with 15 or more employees will be required to permit employees who are organ or bone marrow donors to take a paid leave of absence. The law provides that an organ donor must be permitted to take a paid leave of up to 30 days during a one year period. A bone marrow donor must be permitted to take a leave of up to 5 days in a one year period. An employer can require an employee to provide a written certification from a health care provider that the employee is an organ or bone marrow donor. The new law also provides that such leave does not constitute a break in service with respect to salary adjustments, sick leave, vacation, annual leave or seniority. While an employer may require the employee to use up to 2 weeks of earned but unused sick or vacation leave for organ donation, and up to 5 days of such leave for bone marrow donation, the leave is not to be taken concurrently with leave taken under the federal Family and Medical Leave Act, or California Family Rights Act. Additional obligations of an employer include paying for continued coverage for group medical insurance, and restoring the employee to his or her former position upon timely return from the leave. Thus, employers with 15 or more employees should update their leave of absence policies to include this leave.

II. Administrative Developments.

A. Stepped Up Immigration Enforcement and Workplace Audits. Employment of illegal aliens has been a constant problem for employers, since the law requires employers to screen out ineligible applicants for employment. The U.S. Immigration and Customs Enforcement agency (ICE) recently announced that it intends to step up enforcement of the law, and that it will conduct far more audits of employers than in the past, emphasizing that it is focused on "finding and penalizing employers who believe they can unfairly get ahead" by use of illegal aliens. The audits will focus on a detailed review of the I-9 forms that employers are required to complete and retain. The forms require employers to review and record information regarding an individual's identity and eligibility to work, and to determine if the documents provided by the individual reasonably appear to be genuine. Thus, it is more important than ever for employers to ensure that they are following the rules regarding I-9 forms. Those rules include ensuring that the forms are properly filled out, promptly reviewed, and retained in a separate file for at least three years from the date of hire, or for one year after termination of employment, whichever is longer. Given the continuing political attention to this issue, employers may want to have their I-9 practices reviewed by experienced employment counsel.

B. Employers Given a New Tool to Deal with Exempt Employees Who Miss Work. Under both California and Federal law, if an employer docks the pay of an exempt employee for a partial-day absence, the employee's status as an exempt employee may be lost. This is a serious issue, because loss of exempt status entitles an employee to back overtime pay, compensation for breaks not taken, and could affect the status of other exempt employees as well. Thus, employers often feel hamstrung when dealing with exempt employees who do not put in a full day of work. However, the California Division of Labor Standards Enforcement (DLSE) recently issued an opinion letter which states that reductions of a leave balance, such as vacation, for a partial-day absence by an exempt employee, do not cause loss of the employee's exempt status. For instance, assume that an exempt employee has 12 days of earned but unused vacation on the books, and takes half a day off for personal reasons, such as to attend a child's school event. The employer may not deduct half a day's pay from the exempt employee's salary, but may reduce the vacation leave bank by one-half day, so that the exempt employee then has only 11 and one-half days of vacation on the books. The DLSE did not indicate any minimum increment of time that may be deducted, and that question is an open one. Thus, employers should be careful not to deduct time from leave banks for absences of short periods of time during the day. Before making such a deduction, experienced employment counsel should be consulted to ensure that an employer does not inadvertently do something that causes the otherwise exempt employee to lose the exemption.

III. Court Decisions.

A. Privacy Remains an Important Workplace Right.An employer learned that someone was accessing pornographic web sites using certain computers, after hours. So the employer installed hidden surveillance cameras in an employee's office to monitor activity after hours. When the employee found out about the cameras, she sued for invasion of privacy, and infliction of emotional distress. The California Supreme Court held while privacy expectations may be significantly diminished in the workplace, they are not altogether lacking, and that privacy rights can be greater in enclosed offices, than out in a hallway or open office setting. The court found that the employer had intruded on the employee's zone of privacy, primarily because the cameras were installed without any notice to employees, they were quite intrusive, and the employer did not have a policy on monitoring employees' offices. This case makes clear that employers must inform their employees of possible monitoring prior to installing monitoring devices. It also highlights the need for employers to have legitimate business reasons for such surveillance, and to ensure the surveillance is limited in scope. Privacy issues are of heightened concern these days, and employers must be sure their policies and practices fully comply with the law.

B. Employee Fired by Current Employer for Signing a Noncompete Clause With a Former Employer Can Recover from Current Employer. Most California employers know that noncompetition agreements with California employees will generally not be enforced in California courts, because of California's strong public policy that employees should have the unfettered right to work for whomever they please. But what most employers don't know is what they should do if they hire an employee who signed a noncompete with a prior employer. In a recent case, the court imposed liability on a subsequent employer. Employer C hired an employee, who had previously worked for employer F. Employer F contacted employer C and requested employer C's cooperation in enforcing a confidentiality agreement between the employee and employer F, including a provision prohibiting the employee from sales activities for a competitor for 18 months. In response, new employer C fired the employee, and the employee responded with a lawsuit against employer C. The court held that employer C's decision to honor what was an unenforceable noncompetition agreement with employer F, and to fire the employee, violated the public policy of California, and constituted wrongful termination. Thus, California employers need to exercise extreme caution when they are contacted by a former employer who informs them a new hire signed a noncompete with the former employer. Employers should also have all noncompetition language in agreements reviewed by counsel to ensure compliance with the law.

C. It's Dangerous to Fire an Employee Who Has Just Returned from a Leave. A common experience of employers is one that can cause significant liability, if not handled correctly. An employee goes out on a medical leave. While the employee is on leave, the employer discovers, for the first time, that the employee had not been performing his or her job properly before the leave. In fact, the performance seems to have been so poor and neglectful, that the employer decides to fire the employee upon the employee's return to work. Or, an employee who had a constant tardiness problem before going on medical leave, is late to work on his or her first day back, and the employer decides that is the last straw, and immediately fires the employee. These are very dangerous courses for employers to take, particularly when the employee has been ill, or has given birth. Employees argue that their performance wasn't the motivation for the termination, but rather the motivation was retaliation for the employee taking a protected medical leave (e.g., pregnancy disability leave, worker's compensation leave, family or medical leave), or an attempt to discourage other employees from taking such leaves. Such terminations usually result in a lawsuit, large amounts of attorneys' fees, a large settlement, or a jury verdict in favor of the employee. There are strategies to follow when dealing with poorly performing employees who return from medical leave, that limit liability, including postponing the termination for a reasonable period of time while the employee is on a performance improvement plan. Employers in such situations should consult experienced labor counsel to minimize the risk of getting sued.

D. New Case Further Limits Enforceability of Arbitration Agreements. Many employers require applicants and employees to agree to arbitration of employment claims. Arbitration agreements are often disfavored by the courts, who look for ways to invalidate them. In a case published in the last few weeks, a California Court of Appeal has ruled that including a provision allowing either side to seek injunctive relief in court makes the arbitration agreement or policy one-sided, unconscionable, and hence unenforceable, because the employer is far more likely to benefit from this provision. We believe that the opinion is wrongly decided, particularly since there is a California statute which permits parties to an arbitration agreement to seek injunctive relief without waiving their right to arbitrate. However, the decision is now the law. The court also held that if the arbitration policy or agreement refers to rules of an arbitration provider, the rules must be given to the employee at the same time the employee signs the arbitration agreement. This rule applies to policies in employee handbooks as well. Employers who wish to maximize the enforceability of arbitration agreements should ensure that those agreements comply in all respects with the ever-changing and increasingly strict requirements of the law.

IV. Miscellaneous.

A. Harassment Training Joke Triggers Not-so-funny Lawsuit. Sexual harassment training held by employers has become widespread in California, in large measure due to a recent California law. A recent decision of the California Court of Appeal shows the risk of allowing employees to make light of the training sessions. During a harassment session conducted by the Contra Costa County Sheriff's Department, a sergeant jokingly pointed to a grenade with the number A1" painted on it and said "Yeah, anybody who wants to report sexual harassment take a number". A female deputy, who previously had reported harassment and been ignored, sued. The court held that her original harassment, coupled with the sergeant's cavalier attitude toward complaints, was enough to suggest a sexually hostile work environment. A jury will decide the case. Employers must ensure that employees participating in harassment training understand the importance of taking the training seriously.

B. Lawyers Have Rights Too: Compassion Fatigue. The State Bar of Wisconsin has identified a new malady affecting lawyers, compassion fatigue, defined as the "cumulative physical, emotional, and psychological effects of being continually exposed to traumatic stories or events when working in a helping capacity."  The symptoms include stress, sleep disturbances, pessimism, and isolation. The lawyers most at risk are those who work in criminal, juvenile or family law, but it supposedly affects lawyers in other practices as well. If this was meant to engender sympathy for lawyers, we doubt its effectiveness.

C. Seven Traps for the Unwary Employer or How to Set Yourself Up to Lose a Lawsuit. We're often asked what the most significant sources of liability are these days when dealing with employees. So we came up with this short list.

1. Misclassify employees as exempt from overtime pay.

2. Fail to understand what the law requires regarding meal periods and rest periods.

3. Don't consider an employee handbook your single most important employee document.

4. Discipline or terminate an employee before adequately investigating all of the facts, including the employee's side of the story.

5. Fail to properly administer leaves of absence.

6. Fail to require employees to sign appropriate agreements, and fail to ensure the agreements do not contain illegal provisions.

7. Sexual and other harassment - expose yourself to substantial liability by failing to take some simple preventive measures.

Employers wishing to manage their risks dealing with employees should ensure they understand and comply with the many rules in these areas. Experienced employment counsel can help.

D. Employment Audits Becoming a Valuable Tool in Managing Risk. Given the number and variety of lawsuits being filed by employees, many employers have turned to the employment audit as a way of managing that risk. The audit consists of a comprehensive review of all personnel and human resources policies and procedures, with special emphasis on eliminating those policies and practices that are most likely to lead to a lawsuit, and instituting new policies and procedures designed to give an employer a strong position if a lawsuit is filed. If you are interested in exploring an employment audit, please contact us.

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Cohen & Goldfried
Attorneys at Law
A Professional Corporation
9595 Wilshire Blvd., Suite 201
Beverly Hills, CA 90212
Telephone: (323) 930-0933
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Email: rgoldfried@cogolaw.com

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