Don't Let One Disgruntled Employee Ruin Your Business!
Posted by Jon A. Dieringer | Jan 05, 2022 |
In recent months, Governor Gavin Newsom has signed into law several pieces of legislation that could have a bearing on your employment practices in 2022. Few are entirely new; in fact, most of the items we'll highlight here expand upon legislation enacted within the past five years, providing a novel spin for the new year. Since most employment disputes stem from issues related to wage and hour laws, we'll start there.
Minimum wage boost. Enacted in 2017, Senate Bill 3 stipulated incremental increases to California minimum wage each year. January 1, 2022 ushers in the latest of these increases, bringing the minimum wage to $15 per hour for employers with 26 or more employees and $14 per hour for employers with 25 or fewer employees.
On the horizon:
Intentional wage theft. California raisesthe criminal stakes for employers in 2022 with Assembly Bill 1003, which makes an employer's intentional theft of wages or tips punishable as grand theft. Offending employers would be charged as felons who could face 16 months to 3 years in prison rather than the previously typical civil penalties that the bill's author, Assemblywoman Lorena Gonzalez, called “a slap on the wrist.”
What kind of numbers constitute this particular variety of felony? In any 12 consecutive months, an employer's intentional theft of more than $950 (for one employee) or $2,350 (for two or more employees) in wages or gratuities is punishable as grand theft.
AB 1003 defines intentional wage theft as the intentional deprivation of wages, gratuities, benefits, or other compensation legally due to the employee, with the term “employee” extending to include independent contractors. The smart follow-on question attempts to clarify what's meant by “intentional.” The implication is that the employer carries out deliberate, unlawful deprivation with the knowledge that the employee is due the compensation. Certainly, wage and hour compliance can be tricky for employers, but it seems unlikely that honest mistakes or occasional errors would be construed as “intentional” or impart criminal liability.
Other wage-and-hour issues. Proper records and consistent, informed policies are crucial to help employers avoid disputes involving improper timekeeping, unpaid overtime, and unreimbursed business expenses. Especially with COVID restrictions making hybrid or remote work models so prevalent, employers may face an increase in disputes related to California Labor Code Section 2802. Under Section 2802, employers must reimburse employees for necessary expenses incurred when working. Although not a new law, Section 2802 in an increasingly home-based work milieu may open employers up to the greater risk of wage-and-hour suits. It's worthwhile to review practices and button-up policies now to mitigate that risk.
Separation and nondisparagement agreements. New legislation (SB 331) restson the shoulders of 2018's STAND Act (SB 820), an outgrowth of the #MeToo movement. Under the STAND Act, an employer can no longer compel a victim of sexual harassment to maintain confidentiality regarding the underlying facts of the claim. SB 331 similarly prohibits broad confidentiality provisions in cases unrelated to sexual harassment. As of January 1, 2022, an employee may disclose underlying facts related to an act of harassment, retaliation, or discrimination (based on disability, race, religion, age, or other protected status) but can still be prohibited from disclosing the amount of settlement.
SB 331 tacitly prompts employers and their attorneys to review any litigation settlement agreements that include language prohibiting disclosure of unlawful acts in the workplace. Separation and nondisparagement agreements are obvious places to start, but confidentiality agreements might also need a rework. SB 331's authors drafted wording to be included in such agreements.
Notes on the Not-So-New
Harassment training. For businesses with five or more employees, it may be time to run all workers through training to prevent sexual harassment and abusive conduct in the workplace. Senate Bill 1343 first mandated this training to be provided by January 1, 2020 (later amended to January 1, 2021) and repeated every two years. So employers of a minimalist mindset (i.e., those who complied by that earlier date and haven't revisited since) should ensure they've got that training in the lineup immediately.
Private Attorneys General Act. Stretching back to 2004 but still creating a stir, this California statute essentially deputizes employees to act as private attorneys general, able to pursue civil penalties against employers who've committed labor violations. Pair an employee's PAGA power with any Section 2802 vulnerabilities you may have as an employer (see above), and 2022 could soon become a challenging year.
An Ongoing Saga
In the wait-and-see category, we haveAssembly Bill 51, which we recently covered here. This measure to eliminate mandatory arbitration was on the brink of taking effect when a U.S. District Court injunction stopped it in its tracks in January 2020. The issue remains in a state of flux, volleyed back and forth between California courts and federal law. Until it attains some degree of finality, California employers might consider whether it's in their interest to remove language from their employment agreements compelling workers to agree to mandatory arbitration as a condition of hire. Your attorney can advise you of the approach that best suits your circumstance.
A new year always presents employers with a timely opportunity to review standard agreement templates, compensation policies, and best practices in light of recently enacted measures. It's wise to put enforceable terms in place now and to implement any newly required programs or policies to position your business well for the coming year.
Posted by Jon A. Dieringer | Sep. 20, 2021 |
In a split 2-1 decision, last week the 9th Circuit Court of Appeal upheld a California law that barred businesses from requiring their workers enter into arbitration agreements to resolve discrimination, harassment and Labor Code disputes.
By way of background, Dispute Resolution Policies and Arbitration Agreements are effective and expediate measures businesses often use to resolve employment disputes, and to avoid costly employment litigation or class actions in Court.
The California legislature and plaintiff trial attorneys have routinely attacked employment arbitration agreements. They mostly prefer costly and time consuming court litigation. However, federal law approves of arbitration to resolve employment disputes and has routinely reversed California's attacks against arbitration. As part of the legislature's ongoing attack against arbitration, it passed Assembly Bill 51 (AB 51), and it was signed into law by Governor Newsom in 2019. AB 51 invalidated arbitration agreements that are a condition of employment, and it penalized employers with criminal and civil sanctions.
After AB 51 was signed into law, but before it took effect in 2020, a federal court enjoined its enforcement. That federal court found AB 51 violated federal law that upholds the validity and enforceability of arbitration agreements, so it also violated the Supremacy clause of the US Constitution.
Last week, on September 15, 2021, in a split 2-1 decision, the federal 9th Circuit Court of Appeal reversed the lower federal court and lifted the injunction against AB 51.
The case was Chamber of Commerce of the U.S. v. Bonta, and you may read that decision at this link: https://cdn.ca9.uscourts.gov/datastore/opinions/2021/09/15/20-15291.pdf
As a result of the 9th Circuit's decision, the Court permitted enforcement of AB 51 (without its criminal or civil penalties), thereby prohibiting arbitration agreements as a condition of employment.
The 9th Circuit is the most reversed Circuit in the United States federal court system, and the scathing dissent criticized AB 51 as an unlawful attempt to sidestep federal law. Judge Sandra Ikuta's dissent related California's attacks against arbitration to a "clown bop bag" that responds to getting "smacked down for violating the Federal Arbitration Act" by "bouncing back with even more creative methods to sidestep the law."
That split decision will likely be contested by further court review in the 9th Circuit or Supreme Court. If so, the decision would be automatically stayed until rehearing. While AB 51's anti-arbitration rules are currently in effect, that may be short lived with an anticipated motion to stay the mandate in the 9th Circuit, Supreme Court, or both. There are good reasons to believe a motion to stay would be granted. So, it may be too early to tell at this point how this ruling will impact California Employers.
We at Dieringer Law Group continue to review these developments, and will keep you advised. Every employer who uses an arbitration agreement as part of a Dispute Resolution Policy should confer with their legal counsel in considering whether and how to revise it, or whether to continue using an arbitration agreement as part of their policies to expediently resolve disputes.
Posted by Jon A. Dieringer | Feb 24, 2021 |
Are employees really underdogs in a David v. Goliath conflict? (1 Sam 17:1-58.)
Businesses are often viewed as giant Goliaths against employees who are seen as vulnerable Davids. But Goliath had many vulnerabilities, and David had many strengths. Despite their size and strength, businesses have vulnerabilities that employees and their attorneys often take advantage of. Let's take a look:
So, an employee (and his attorney) is not really the underdog – he has powerful advantages just as David had advantages over Goliath. Can you address your company's vulnerabilities?
Posted by Jon A. Dieringer | Feb 24, 2021 |
Last year, our office foreshadowed that the Dynamex decision re-defining the independent contractor relationship may extend to the franchisor-franchisee relationship.
This week our prediction that Dynamex' ABC definition for independent contractors for franchises was realized, in the Federal 9th Circuit case of Vasquez v. Jan-Pro Franchising, Inc. So, if you are a franchisor or mid-level franchisor, chances are a disgruntled franchisee may try to take advantage of you and claim to be an employee – and he may win! Even multi-level franchise arrangements do not affect the top-tier franchisor. As the court stated:
As long as the worker was providing a service to the hiring entity even indirectly, the hiring entity can fail the ABC test and be treated as an employer.
Some quick take-aways to think about over the weekend:
1) Dynamex' employment definitions may be extended further. Even those business relationships like a franchise that you believed would protect you from employment claims may not work! The Courts will still analyze those workers to see if they are really employees, as defined by Dynamex' ABC test, which in a nutshell is defined as: (A) absence of employer control; (B) worker's service performed outside usual business of employer; (C) worker is customarily engages in independent business. If your worker is not an employee on payroll, a legal analysis of that relationship might help you.
2) Arbitration agreements worked to keep the mid-level franchisor out of court, and resolved those cases much earlier and at lower cost. Consider a good arbitration agreement with class-action waiver, especially as the example of Vasquez and related class-action cases were filed in 2008 – over two decades of litigation and attorney fees. Can your business afford to be the next test case?
3) This ABC definition for independent contractors is retroactive, meaning it applies even to older cases. So, you may expect former workers of years ago to pop up and claim unpaid wages and overtime.
There is more to learn from this and other recent cases that have challenged employers throughout the state.
Perhaps now is a good time to speak with the Employment Law Attorneys at Dieringer Law Group, APC. We have a few good plans to help protect your business.
Despite warnings that applying the ABC test to franchises “would sound the death knell for Franchising in California”, the 9th Circuit in Vasquez held that these franchise relationships may be improperly misclassified, and those franchisees would be entitled to minimum wage and overtime, meals paid rest breaks, and workers compensation and unemployment insurance benefits, among other benefits of employment.
It bears repeating that the California Supreme Court in Dynamex reached all the way to Massachusetts' to insert its “Independent Contractor Law” (MICL) as the new rule in California for defining an independent contractor relationship.
The “ABC” test presumes that a worker is an employee, unless the hiring agent can rebut that presumed employment relationship by showing (A) absence of control by the hiring agent over the worker; (B) the service is performed outside the usual course of business of the employer; and (C) the worker is customarily engaged in an independently established trade, occupation, profession or business of the same nature as that involved in the work performed.
Jan-Pro operated a three-tiered franchising structure that offered cleaning and janitorial services. Jan-Pro sold exclusive rights to use its trademark in the name "Jan-Pro" to entities known as regional master franchisees that became responsible for the Jan-Pro business in a defined geographic territory and gained the exclusive right to sell cleaning franchises in that territory. In turn, regional master franchisees sold "unit franchises," pursuant to which the purchasers gained the exclusive right to service certain accounts provided to them by their regional master franchisees.
This litigation involving franchisor Jan-Pro has several related cases that span over two decades, two federal district courts and two federal appellate court decisions, and State Court litigation in Massachusetts and Georgia.
In Georgia, where Jan-Pro is headquartered, the Georgia Appellate Court applied the Massachusetts' ABC test in a case closely related to Vasquez. But the court refused to find an employment relationship by concluding: “Depianti was free from the control and direction of Jan-Pro; the cleaning services he performed were outside the usual course of Jan-Pro's business; and Depianti was engaged in an independently-established business.” The Georgia Supreme Court tacitly agreed by refusing to hear it.
Take-Aways from Vasquez.
1. Retroactive. The ABC definition for independent contractors is retroactive, meaning it applies to employees working before that Massachusetts definition was first introduced by the California Supreme Court on April 30, 2018.
2. Persistence. Beware of the dogged persistence of plaintiff attorneys. This case commenced in 2008 in the state of Georgia, then to Federal Court in Massachusetts, with a brief Q&A to the Massachusetts Supreme Court, then back to Federal Court. These plaintiffs were parties to the earlier actions, before their claims were severed and sent to Federal Court in Northern California.
3. Arbitration. For a long time in California, working relationships have varied between wage-earning employees and contractor relationships. Last year's Dynamex decision from our California's Supreme Court turned this
It is unclear why our plaintiff unit franchisees have sued only Jan-Pro, not the parties they contracted with directly. One explanation is that their agreements with their regional master franchisees included mandatory arbitration provisions.