On January 31, 2014, a California Appellate Court reversed an employer’s summary judgment despite well documented evidence of the employee’s history of poor performance.  This decision—Cheal v. El Camino Hospital (No. HO36548)—addresses a pivotal question for employers: when can employers legitimately terminate a protected employee because of poor performance?

At the age of 61, Plaintiff Carol Cheal (“Plaintiff”) was terminated from her job as a Dietetic Technician Registered from Defendant El Camino Hospital (“Defendant”). In this position, Plaintiff was primarily responsible for preparing menus for hospital patients.  Between January and September 2008, Plaintiff’s supervisor provided her with multiple written warnings, including a final warning for her failure to adhere to hospital procedures that ensure correct foods reach the correct patients.  Ultimately, Defendant terminated Plaintiff on October 10, 2008 because it determined she was no longer competent to perform her duties.

Plaintiff later filed a lawsuit asserting, among other things, age discrimination.  Defendant’s Summary Judgment Motion was granted by the trial court because Plaintiff failed to show that she could perform her job in a satisfactory manner.  Subsequently, a California Appellate Court reversed Defendant’s Summary Judgment.  In doing so, the Court analyzed the following elusive question: what constitutes satisfactory employee performance?  While the Court stated that an employer is free to set standards and discipline an employee that might appear unreasonable to outside observers, the Court cautioned that an employer’s standards and discipline must be applied evenhandedly.  The Court reasoned that because Defendant’s policies actually allowed for mistakes, and because similarly situated employees also made mistakes without the consequence of termination, there was a triable issue as to whether Plaintiff performed her job in a satisfactory manner.  As such, Defendant could not defeat Plaintiff’s case on summary judgment.

For employers, the Cheal case presents two practical takeaways.  First, employers must enforce their policies evenly among all employees.  If one employee is treated more harshly than others, this unequal treatment may later be used as evidence of a discriminatory animus.  Second, employers should review their policies to make sure they clearly delineate what constitutes adequate job performance.  In Cheal, Defendant’s policy allowed its employee’s to make a certain number mistakes, which according to the Court, defeated Defendant’s argument that Plaintiff was unable to competently perform her job duties.

Ambiguity in settlement agreements can sabotage finality and certainty as a recent California decision shows. Where a settlement agreement is silent regarding litigation costs, an employee may obtain mandatory costs as the prevailing party under state law as the settlement proceeds constituted the required “net monetary recovery,” the California Court of Appeal has ruled. DeSaulles v. Community Hosp. of the Monterey Peninsula, No. H038184 (Cal. Ct. App. May 2, 2014).

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Originally posted by SmartRecruiters Blog, the leading source for how to hire on the web. To view the original post, please click here.

So you’re a startup. You’ve decided to take your world-changing idea and move it out of your dorm room/garage/favorite-table-at-Starbucks and start a legitimate business. So what next?

If you plan on staying in business for the foreseeable future, you might want to make sure you’re compliant with employment laws since lawsuits can cost businesses hundreds of thousands of dollars. Indeed, the average cost for single-employee lawsuits – excluding any money paid for settlement – is around $100,000 and on the rise. The following list outlines 10 key areas in employment law that startups should be thinking about, but often are not.

Startup Employment Law

Photo Credit: Maygrove Campus News.

1. Federal, State, and Local Laws. You’ve heard of minimum wage, overtime, meal breaks, etc. And if you’re like most people these days, you turn to the internet, search “minimum wage”, and read the first thing you see. But there are federal, state, and local laws that usually cover the same topic differently. Although subtle, those differences could spell trouble if you’re not following all of them properly.

Take minimum wage for example. The federal minimum wage is $7.25 per hour. In California, it’s currently $8.00. Narrower still, in the City and County of San Francisco, it’s $10.74, and in San Jose, $10.15.

Bottom line? What you don’t know can hurt you. Federal law, which is most likely to pop up first on a simple Google search, may not tell the full story of what you’re legally required to do as an employer. Make sure to dig deeper into state and local laws. A good resource for federal law is the United States Department of Labor. California-based companies can look at State of California Department of Industrial Relations webpage.

2. Job Postings. Before you even meet a potential hire, your job posting may potentially subject you to a claim for discrimination or other violation of the law.

In the startup world, a common potential mistake is to request “US Citizens only” in job postings. Obtaining visas for employees can take time, money and resources – all of which you’re trying to conserve. The request is innocent enough, but employers cannot limit job applicants or hires to U.S. citizens, unless they are required to do so by federal, state, or local laws or federal contracts.

What you can and should ask is whether an applicant is currently authorized to work in the United States or will require sponsorship for employment. Under the anti-discrimination provision, nonimmigrant visa holders cannot claim a violation of the law for failure to hire based on their need for sponsorship.

3. On-Boarding Paperwork. So you’re ready to make your first new hire (or your second, or your tenth – congrats). You’ve verbally or electronically explained pay rate and start date to your new hire, but you’re still missing important documentation.

All employers in the United States are required to complete an “I-9.” Form I-9 is used for verifying the identity and employment authorization of individuals hired for employment in the United States.  Otherwise, you can be subject to significant fines and penalties. You can download Form I-9 here.

You should also issue a Form W-4, so that so that you can withhold the correct federal income tax from your employee’s pay. You can download Form W-4 here.

4. Culture vs. Compliance. Remember, you’re in business now, and you have to keep it professional. I know many of you want to keep your culture fun and relaxed, but without some formal policies and protections for your employees, you may inadvertently open your business up to some serious consequences such as claims for discrimination or unequal treatment.

Age discrimination is a prominent issue facing startups, and then trend to sue is only climbing. According to the EEOC, claims of this type have increased more than 31% between 1997 and 2013. Be careful to avoid using language and terms in job postings and during interviews that could be construed as a bias towards hiring younger employees, such as “we’re a young, energetic company.”

Sexual harassment is another pain point common in laid-back environments, and you should never assume your employees will know what behaviors constitute as sexual harassment. In 2013, the Equal Employment Opportunity Commission received 27,687 “sex-based” charges costing companies millions of dollars in settlements and legal fees. Federal and state laws say employers must do everything possible to prevent harassment and discrimination from occurring, even requiring you to distribute literature on the issue and/or hold management and employee trainings.

Prevent sexual harassment and discrimination in your startup by distributing company-wide handbooks and personnel guides that spell out your company’s policies. Have labor counsel review the materials before issuance to ensure that all necessary elements are included. Then set the tone in the office by practicing what you preach so others may follow your lead. Nobody wants you to stop having fun, but nobody wants to see you get sued either. I promise, there is a happy medium.

5. Employee Manuals. Employee manuals don’t have to be the super corporate antithesis of your startup. In fact, your employee handbook can be a reflection of the culture of your brand, written with your unique tone expressed throughout. What’s important is that it contains policies regarding leave laws, zero tolerance for harassment and discrimination, benefits, an “at-will” definition and acceptable workplace behavior at the minimum.

If you don’t provide these policies/notices to employees, you may be violating required federal, state or local notices. Without a handbook, an employee who later decides to sue may use your absence of policy as evidence that you weren’t following the law. Setting a good foundation for what you expect from your employees, and what your employees can expect from you, will help protect against future problems.

6. Classifying Employees. I often hear startup leaders say, “My employees are exempt. I pay them a salary.” Not so fast! Paying your employees a salary does not make them exempt from overtime or other requirements.

Whether an employee should be classified as exempt or nonexempt varies between state and federal law, and between roles and positions. For example, compare how California treats the issue of exempting employees in the computer software field versus how the federal Department of Labor analyzes the issue. As to how states have been expanding the computer professional exemption, check out these recent decisions in California and New York.

Misclassifying employees as exempt when they’re not can lead to disastrous results. The Wall Street Journal’s Law Blog reports that wage-and-hour lawsuits—including misclassification—increased by around 10 percent in 2013. And this is no joke. Your company could be exposed to potential class action lawsuits seeking to recover unpaid wages and overtime, penalties, and attorneys’ fees. Talk to your employment attorney to make sure your employees are properly classified.

7. Use of Independent Contractors. It may seem like a good idea to avoid the whole “exempt” issue, avoid paying overtime, and simplify your life.  You think you’ve found the loophole and have decided to hire “independent contractors.” But, like the exemption issue, calling a worker one thing, does not make them so. Even with a signed agreement in hand, it does not mean they’re not your employee.

The IRS uses a “20-factor test” to assess the degree of control the company exercises over work performed by an independent contractor. If the company exercises too much control, the worker is an employee. A similar test is used for status under workers’ compensation laws.

With the myriad of laws, it is possible for a worker to be classified as an independent contractor under one law, but an employee under another. This is all the more reason to make sure you are properly evaluating worker status. Read how California examines the issue here.

8. Hiring of Interns. This may crush your plans for compensating interns with just places to crash and endless pizza, but there is really no such thing as an “unpaid internship” anymore. Interns should have pay, training, and/or college credit.

Generally, you are expected to pay for all time an employee works. Under federal law, an exception to this rule may apply if the intern’s training meets certain criteria. State or local laws may impose even stricter or additional criteria on when an internships. So check with your employment attorney to see if your internships qualify, as lawsuits for “unpaid internships” are on the rise.

9. Paying Your Employees. Writing a check to your employees once a month or handing them cash will not be a sufficient system for paying your workers. State and federal laws require certain information to appear on pay records, and that you state how frequently and by what means you plan to pay. Failure to provide this required info can later form the basis for a class action lawsuit.

10. As You Grow, So Will Your Legal Obligations. As your startup grows, so will your obligations to your employees. Several federal and state laws that were once not applicable to you, may become mandatory. For example, employers with 50 or more employees must provide a certain amount of Family Leave and adhere to the laws in the Affordable Care Act. As you grow, stay connected with your employment law office to stay on track with the increased legal responsibilities.

If the above points have you thoroughly confused and a bit stressed, there’s no need to panic. While the myriad of employment laws can make the idea of launching your startup seem daunting, a skilled and educated employment lawyer can help you navigate these treacherous waters. And making sure you find the right labor and employment lawyer to assist you with your business is as critical as making sure you have the right patent or contract lawyer working for you. Doing so will save you time and money – and will help you lay important groundwork to continue growing, hiring and moving forward.

California Labor Code section 226 requires employers to provide accurate wage statements, and enumerates specific requirements for such wage statements.  The statute also provides for penalties should an employer violate section 226, and allows a prevailing employee to recover attorneys’ fees in connection with prosecuting claims for alleged wage statement violations.

On May 6, 2014, California’s Assembly on Judiciary heard arguments concerning Assembly Bill 2095, a proposed amendment to Labor Code section 226(h)’s attorneys’ fees provision, which would amend section 226(h) to provide a two-way fee shifting provision.  Under the proposed amendment, employers who successfully defend against a frivolous wage statement claim could recover their attorneys’ fees in doing so.  Supporters of AB 2095 contend the amendment is necessary to help deter bad faith claims for alleged technical violations of Labor Code section 226 that do not cause any injury to the employee.  The bill’s supporters cite, for example, to a 2010 case in which the alleged violation was the employer’s use of a truncated name on employees’ wage statements.  Although the claim was dismissed on summary judgment, supporters of AB 2095 were disturbed by the unnecessary attorneys’ fees and costs the employer incurred to defend against the claim, prompting the proposed amendment.  In contrast, opponents argue AB 2095 is unnecessary because the standard to show the requisite injury under Labor Code section 226 was heightened in 2012, and because a 2013 amendment to the Code of Civil Procedure already allows prevailing employers to recover attorneys’ fees in bad faith litigation.

Should AB 2095 pass, it would mark a small victory for California employers, as employees and their attorneys would have to carefully evaluate whether to bring a Labor Code section 226 wage statement claim for alleged “technical” violations that have not caused some notable injury.

On April 30, 2014, the United States Court of Appeals for the Ninth Circuit reinstated a lawsuit filed by Plaintiff Ronald El-Malik Curtis against the City of Oakland, and several individual city officials on the ground that facially-neutral conduct could support a finding of racial animus sufficient to sustain a hostile work environment claim when other racially-discriminatory conduct is present. (Curtis v. City of Oakland, No. 12-15831, per curiam.)

Plaintiff, an African-American firefighter and paramedic filed a lawsuit in 2010 claiming that he and several of his African-American colleagues working for the Oakland fire department were being harassed and subjected to a hostile work environment on the basis of their race.  Of the three shifts that comprised Plaintiff’s particular fire department unit – referred to as Shifts A, B, and C – all African-American firefighters in the unit were staffed to Shift B.  Plaintiff alleged that firefighters working Shifts A and C would frequently make disparaging comments about the firefighters working on Shift B, often referring to Shift B employees as “the brothers.”  In addition, on more than one occasion Shift B employees found their personal items missing or vandalized, their food tampered with and, on one occasion, a dead bird was found underneath Plaintiff’s bed at the station house.

District Court Judge Susan Illston granted summary judgment to defendants on the grounds that even if Plaintiff’s allegations of pervasive mistreatment were true, there was no evidence to suggest that the abusive treatment Plaintiff suffered was racially-motivated.  Indeed, the events alleged by Plaintiff were facially race-neutral, aimed more at humiliating Plaintiff’s shift generally than at Plaintiff particularly, and several actions — such as the food-tampering and dead-bird incidents — lacked a known perpetrator.  Under these facts, the District Court determined that Plaintiff could not sustain a claim for hostile work environment race discrimination.

The Ninth disagreed, finding that a reasonable jury could interpret the behavior alleged by Plaintiff may have unlawfully targeted Shift B on race-related grounds. The Court reasoned that “although some of the conduct appeared to be directed at Curtis’s shift, in general – as opposed to African Americans, specifically – the circumstances suggest that Curtis’s shift may have served as a proxy for the animus particularly given that it was predominantly made up of African-Americans and there were no other African-Americans on the other shifts during the relevant time period.”  On these grounds the District Court’s summary judgment ruling was reversed and the case remanded.

The Curtis decision arguably broadens the scope of liability for hostile work environment claims brought federal courts within the Ninth Circuit.  Employers should be mindful that repeated antagonistic behavior aimed a particular shift or other work segment predominantly comprised of protected classmembers — even if facially race-neutral — may provide a sufficient basis to withstand summary judgment proceedings if a hostile work environment claim is ever litigated.

 

An employer did not violate the federal Family and Medical Leave Act by requiring an employee to undergo a fitness-for-duty evaluation after it had restored her to her position following a medical leave of absence for psychological issues, the California Court of Appeal has ruled. White v. County of Los Angeles, No. B243471 (Cal. Ct. App. Apr. 15, 2014). Reversing a permanent injunction prohibiting the employer from requiring the evaluation, the Court noted the request for an evaluation was appropriate, given the employee’s erratic conduct prior to her leave and the requirement that she carry a weapon as part of her job. To read more, click here.

Finding an intern had produced sufficient evidence for a reasonable jury to conclude his supervisor engaged in a pervasive pattern of harassing conduct “because of sex,” including numerous gifts, frequent lunch purchases, along with sexual jokes and displays of pornographic computer images, the California Court of Appeal has allowed his harassment suit to proceed, reversing a lower court’s summary judgment against the plaintiff. Lewis v. City of Benicia, No. A134078 (Cal. Ct. App. Mar. 26, 2014). The Court further found the trial court erred in excluding evidence of the alleged harassment in the intern’s retaliation claim against the City of Benicia and ordered a retrial on the retaliation claim. To read more, click here.

San Francisco has joined the growing numbers of cities and states around the country implementing “ban the box” legislation which restricts inquiries regarding an applicant’s criminal records on applications for employment and during job interviews.  The EEOC recommends “banning the box” in line with its guidance regarding convictions and consideration in use of information based on job-relatedness.  Currently, 10 states have “ban the box” laws in some form impacting public or both public and private employers.  These states include Hawaii, California, Colorado, New Mexico, Minnesota, Illinois, Rhode Island, Connecticut, Massachusetts and Maryland.  Other states that have “ban the box” legislation pending include Delaware, New Jersey, Michigan, North Carolina and Ohio, among others.  San Francisco’s Fair Chance Ordinance becomes operative on August 13, 2014 and applies to private sector employers in the city of San Francisco.  For specifics regarding the San Francisco ordinance click here for information.

Timing is not everything. In Rope v. Auto-Chlor of Washington System of Washington, Inc., the employer fired an employee for purported performance reasons on December 30, 2010 – two days before California’s Michelle Malkin Donor Protection Act became effective.   The timing was significant because when the employee was hired in October of 2010, he had told his employer that he needed to take leave in February of 2011 to donate a kidney to his sister, and he later requested 30 days of leave (the maximum involved under the new donor protection law) in February of 2011. The California Court of Appeals held that the employee could not state a claim under the Michelle Malkin Donor Protection Act because the Act was not yet in effect. However, the Court permitted the employee’s claim of “associational” disability discrimination to go forward, allowing the employee to litigate the question of whether the employer had terminated him due to his association with his sister. For more on this interesting case, click here.

On October 10, 2013, California Gov. Jerry Brown signed a bill, A.B. 556, to add “military and veteran status” to the list of categories protected from employment discrimination under the California Fair Employment and Housing Act (“FEHA”).

When this bill becomes operative on January 1, 2014, the FEHA will prohibit harassment and discrimination in employment because of:

• Race
• Religious Creed
• Color
• National Origin
• Ancestry
• Physical Disability
• Mental Disability
• Medical Condition
• Genetic Information
• Marital Status
• Sex
• Gender
• Gender Identity
• Gender Expression
• Age
• Sexual Orientation
• Military and Veteran Status

“Military and veteran status” will be defined to mean any person who is “a member or veteran of the United States Armed Forces, United States Armed Forces Reserve, the United States National Guard, and the California National Guard.”

As a general reminder, any employer regularly employing five or more persons is covered by the FEHA. Employers subject to the provisions of the FEHA include private employers as well as state, city, county, and other government bodies. In fact, all governmental employers are covered under the FEHA regardless of size. Also covered are labor organizations, employment agencies, and apprenticeship programs. Furthermore, when harassment is at issue, every employer employing one or more persons or receiving the services of one or more independent contractor(s) is subject to the FEHA’s prohibition of harassment. Additionally, individual employees who harass another co-worker in violation of the FEHA can be held personally liable.